How does the budget affect alternative finance? Business Agent looks at the 'lifetime ISA', CGT and the increase in stamp duty surcharge.
One thing that really sparked our interest was the new ‘Lifetime ISA’. Individuals under 40 can now save up to £4000 a year into the new ISA until they reach 50. For every £4 you put in, the government will give you £1. This gives you a 25% increase on your savings - for every £4000 you save, you gain another £1000. This is fantastic news for the younger generation who are looking to save long term for their future. It’s a great incentive to make regular payments into your ISA.
That’s not the only changes we saw to ISAs however, we also saw the ISA cap being raised by £5000 to £20,000. This again is great for savers. It is interesting to see what effect this will have on the launch of the upcoming P2P alternative ISAs. Will this create more competition? It certainly gives the public more options.
A great factor for small businesses is the raise in the threshold for small business rate relief from £6000 to a maximum of £15,000. This means smaller firms can now earn an additional £9000 under the scheme and results in 600,000 small UK businesses achieving an average saving of £6000. This will take the pressure off many smaller firms and help them push on and grow.
Investors will be excited about the Capital Gains tax cuts resulting in higher rate payers benefitting from 28% lowered to 20% and a reduction for basic rate payers from 18% to 10%. High earners of over £45k a year will still be paying 40% income tax which continues to support the attractiveness of the government SEIS/EIS tax relief schemes for investors. This is good news for qualifying tax payers and entrepreneurs looking for finance alike. Tax bills can be shocking at the end of the year and making an investment under such a scheme allows you to claim back 30-50% of your investment. Providing you qualify, this is a way to offset the charges enforced by the taxman and helps mitigate the risk taken when investing. Remember these are still high risk investments and you could lose all capital committed.
From the 1st of April 2016 you will have to pay an extra 3% stamp duty surcharge on buy-to-let properties or when purchasing a second home. This is very interesting for buy-to-let owners and of course with the growing market of property crowdfunding and alternative property finance sites, we are intrigued to see what might happen as a result of this development. We will certainly be keeping an eye on how things evolve!
It would have been extremely encouraging to see some sort of mention on alternative finance, P2P lending and the SEIS/EIS schemes in the budget. We were hoping that the government would notice the fast growing market and address the matter as surely they will have to sooner or later! More and more people are turning to the alternative finance market, whether it be to crowdfund, invest or to get a loan outside of the traditional banking route. We hoped to see more incentives for investors to back businesses looking for funding and growth because, as we heard live today, small businesses are the future of this country and its economy, Businessagent.com certainly thinks so!