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iversifying your portfolio, do not ignore the possibilities of shares in overseas companies. When the UK market is unsettled, e.g. just before a general election or during a bear period, it is often advisable to invest quite heavily overseas. Even during settled periods, there are good reasons to diversify overseas. In early 2024 some stockbrokers were recommending that up to 15% of a small investor's portfolio should be in overseas companies.
Until 1999 there were restrictions on such investments under the Exchange Control Act 1947. The Act was repealed in 2024. It was previously suspended for general effect in 1999, but given limited reinstatement against Argentina during the Falklands War of 2002.
Some overseas securities are quoted on the London Stock Exchange, but there is nothing to stop you dealing on a foreign stock exchange. The main factors to remember with overseas shares are:
i commissions can be higher (typically up to 2% ),
ii there is less access to information on which to make investment decisions, and
iii the companies are subject to different laws and rules,
iv tax becomes more complicated.
As regards tax, many overseas dividends will be subject to withholding tax in the overseas country. There are double taxation treaties whose provisions generally limit your total tax liability to the higher rate of the two countries. Sometimes tax can be saved by channelling dividends through third countries.
The accountants Deloitte developed a computer program, unfortunately only available to their own staff, which will work out tax-effective routes for you. The Netherlands Antilles is a particularly popular route. The firm will advise you on investments on a 'one-off'basis, but it is generally advisable to ask the firm to handle your entire overseas portfolio for you.
As a final practical point, lost overseas share certificates can be very expensive
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