It is an election year in the United Kingdom and in just a few months’ time the nation will head to the polls. It is going to be an incredibly tight contest, with many experts predicting that we could have a hung parliament, resulting in another coalition government.

What does all this mean for your finances?

Investments

UK election results don’t tend to cause seismic shifts in the financial markets but the old adage that the markets hate uncertainty could be an issue this year. Such a close contest could see things get jittery in April and May.

“Historically, the UK market has been somewhat apolitical when it comes to who wins,” says Mark Wharrier co-manager of the BlackRock UK Income Fund. “That said, we continue to recognise elevated risk levels in politically sensitive sectors, notably utilities and gambling.”

Gambling could suffer as a result of the election. Shares in listed bookmakers Ladbrokes and William Hill have declined sharply since the Budget last year. Back then, Chancellor George Osborne introduced a higher tax rate for fixed-odds gaming machines. Things could get even worse with Labour threatening to introduce a new tax on all sports betting.

Another sector that may suffer is utility firms. While many have announced price cuts as a result of the falling oil price, the cuts are small and not coming in for months. There is a good chance all parties might take aim at high energy bills as part of their election manifestos.

Taxes

You should also be prepared for tax rises. “History tells us that despite what the parties tell us before an election, taxes rise immediately afterwards,” says Danny Cox, a chartered financial planner at Hargreaves Lansdown. “On this basis using tax shelters such as Individual Savings Accounts is important to reduce the income tax payable.”

Taxes are certainly likely to play a key role in the political promises that come pouring out before the election. Labour is already saying it will reverse the Conservative Party’s tax cuts for millionaires and is threatening a mansion tax on houses worth over £2m. The Liberal Democrats also back a mansion tax.

Making your finances as tax efficient as possible should be a key aim ahead of the election. This means using up your ISA allowances, making sure you’ve used your capital gains tax allowance and perhaps most importantly making the most of pension tax relief.

“Labour are pushing for tax relief to be cut to 45 per cent for taxpayers, the Lib Dems are edging towards a flat rate of 25 per cent and the Tories are very deliberately keeping quiet but the word is that they too are actively looking at ways to cut relief,” says Cox. If you are a higher or additional rate taxpayer you should take full advantage of pension tax relief before the election.

Housing market

After a few years of strong growth the housing market could falter as a result of the election. A Conservative win is likely to result in a market that continues to grow; the past five years have shown us that David Cameron and Osborne are both prepared to take steps to keep house prices rising.

But with the Labour Party talking about bringing in a mansion tax on properties worth over £2m, price growth could stall in areas like London where many people may put off moving in order to see what happens with property taxes.

Cash

Interest rates are not expected to rise until late 2015 at the earliest, and even this looks increasingly unlikely as inflation remains incredibly low. This means that interest rates on savings accounts are unlikely to rise any time soon.

The outlook for anyone keeping savings in cash will remain much the same regardless of the election. You need to keep your nose to the ground in the hunt for the best possible rates, and consider taking on more risk and looking to the stock market if you want to improve your returns.

One area where the election could have an impact, though, is exchange rates. The pound is currently enjoying an incredible period of strength against the euro. This is thanks to, among other things, quantitative easing in the eurozone and the Greek crisis. But a tightly fought election resulting in a possible hung parliament and the uncertainty that brings could cause the pound to tumble.

If you’re planning a holiday later in the year, now might be the time to buy your currency.