Budget 2015 – FinTech & AltFi Implications

April 7, 2015

The Chancellor of the Exchequer gave his Budget to Parliament on 18 March 2015. Although there were many announcements of significant interest to the FinTech and Alternative Finance communities, how much of the Budget is merely a re-hash of the Chancellor’s Autumn Statement?

Crowdfunding and Peer-to-Peer Lending

A new and welcome development is that the list of qualifying investments for ISAs is likely to be extended to include equity securities and debt securities (i.e. mini-bonds) offered via crowdfunding platforms. This will be discussed in a consultation this summer alongside a response to the consultation on the inclusion of Peer-to-Peer loans in ISAs.

A further welcome development is the introduction of a tax free allowance on up to £1,000 (for basic rate taxpayers), or £500 (for higher rate taxpayers), of interest on Peer-to-Peer loans.

Following the announcement made in the Autumn Statement, the government have introduced a new relief which will allow individuals lending through Peer-to-Peer to offset any losses incurred through loans which go bad against other Peer-to-Peer income. This relief will apply to losses incurred from April 2015.

Though the attractiveness of Peer-to-Peer lending will certainly be increased by the above developments it will not be until the summer, when the full response to the ISA consultation is published, that the full extent of the developments will be known. Following this it will be interesting to see if there is an uptake in this space on the investor side over and above its already impressive growth curve.

The Bit goes Legit

The government announced its intention to apply anti money laundering regulations to digital currency exchanges in the UK, aimed at supporting innovation and discouraging criminal use of digital currencies. However the government are arguably one step behind on where this industry is headed, given that the smart money is on blockchain technology and smart contracts.

The government will also be increasing research funding into digital currencies by £10 million. This funding will support a new research initiative which will bring together the Alan Turing Institute and Digital Catapult. Together these bodies will address the opportunities and challenges for digital currency technology.

The intention to provide a supportive framework for legitimate digital currency businesses is certainly one to be welcomed and provides legitimacy to a sector more commonly associated with nerds and narcotics!

APIs

Although nothing new has been raised in the Budget it is encouraging to see the government voice their commitment to bank APIs and confirm their plans deliver a framework for the design of an open API standard in the UK by the end of 2015.

The expansion of FinTech in the North

Following the Tech Nation report in February, which revealed that 170,000 people are now working in digital businesses in the North of the UK, the government has pledged to invest £11 million in tech incubators in Manchester, Leeds and Sheffield. This is indicative of the fact that the growth of the industry will not be limited to London but actively encouraged and invested in throughout the country.

Conclusion

The Crowdfunding, Peer-to-Peer and Digital Currency communities will be buoyed by this positive budget but should note that the measures outlined are only incremental steps and not game changing of themselves. Trust, transparency and legitimacy issues will need to be addressed through the communities themselves.


Related pages:

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