Many investors will be relieved that the result of the election meant that pro-business policies would be maintained and personal aspiration continue to be encouraged.
There are good reasons to be cheerful. One of the Conservatives’ pre-election promises was that there would be no increase in income tax, National Insurance or VAT during their term in office, and a commitment was also made that the tax-free personal allowance would be increased from the current £10,000 to £12,500 by 2020.
In addition, the higher rate tax threshold, above which 40% income tax becomes payable, is to be increased from its current £42,385 to £50,000, again in the longer-term.
There could also be good news on the inheritance tax front. The Conservatives’ pledge has been to take most people’s homes out of the charge to inheritance tax by increasing the tax-free allowance enjoyed by married couples and civil partners from £650,000 (£325,000 for each partner) to £1 million (£500,000 each).
It is not yet clear how this might be done, but one possibility would be to provide an extra allowance of £350,000 (£175,000 per partner) to set against the value of their home.
The recent dramatic changes to pensions taxation are less likely to be disturbed than if a government of a different hue had come to power, though further restrictions on contributions by higher earners are being mooted and many are already wondering whether the new ability to cascade pension wealth down through the generations, free of inheritance tax, will be permitted to continue indefinitely.
One of the more recent proposals was that people who had already bought pension annuities should be allowed to sell these to a commercial third party in exchange for cash or a more flexible income. This proposal is subject to consultation, but the proponent of the change was Steve Webb, a Lib Dem minister who has been deposed, and there may now be some question as to whether it will go ahead.
As far as investments are concerned, two major issues hang over the UK stock market, namely the UK’s relationship with the EU and the possibility of Scottish Independence. One reason why we invest on a global basis.
However, there are again some reasons to be cheerful, in that Officials in both Brussels and Berlin have made clear their wish to retain the UK within the EU.
The other cloud on the investment horizon is the effect on the corporate and government bond markets of the withdrawal of the “quantitative easing” stimulus provided by central banks in the wake of the financial crisis. Again global diversification will prove beneficial.