A Budget for alternative savers

  • george_osborne_march_12.jpgChancellor George Osborne’s latest Budget statement contained few major surprises for the business sector, but did serve to confirm that many of the initiatives to support the Alternative Finance industry remain ‘work-in-progress’.

    For example, we are now informed that plans to create a new class of ISA specifically to accommodate P2P investments, which were first mentioned in the Chancellor’s Budget in March 2014, are subject to further consultation this summer – in other words, after the General Election in May. The more optimistic had been hoping that details would be revealed in time for the new 2015-16 tax year.

    No further clarification was forthcoming from Mr Osborne either about the new mechanism through which the major banks will be compelled to refer rejected loan applicants to alternative sources of finance; the appropriate regulations under the Small Business Bill are expected to hit the Statute Book some time next month.

    An area of good news for the sector was the announcement that the first £1,000 of income from savings will be tax free for basic rate taxpayers (£500 for higher rate taxpayers) and the confirmation on Thursday that this includes loan interest from P2P investments.

    Mark Hawkins, FD of Invest and Fund, said: “It would take a deposit of £1 million to generate interest of £1,000 at a bank deposit rate of 1%, so consider how long it would take the average saver to benefit”, said Mr Hawkins. “However, some rates of return [from P2P] can be as high as 15% per annum which, in theory, could mean that an investment of as little as £6,667 would be sufficient to generate £1,000 of income, albeit at higher risk”.

    According to Altfi data, the industry made an average return of 5.09% for investors across the last 12 months. This is over four times the amount that can be earned on deposit from a major bank or building society in the same period. Net returns will increase substantially from April 2015 when the new rules allowing P2P lenders to offset losses against tax become effective.  According to Government figures, bad debt relief on P2P loans will save investors £10m on interest earned over the next year. This amount should increase to £15m on interest earned in 2016-17 and £20m on interest earned in 2017-18.

    Perhaps the most far-reaching news, however, was confirmation that pensioners will be able to sell an existing annuity in order to release cash held in their pension pot, thus bringing them into line with those not yet retired who, after next April, will not be forced to buy an annuity in the first place. This will add to the wall of cash looking for a new home.

    With all of these innovations and amendments to digest, the need for independent, objective advice surely becomes even more crucial. The news is out there and people will want to know how best to benefit and what pitfalls to avoid. It is such a pity that those best placed to give that advice outside of Government – for example, members of the IFA community – have demonstrated a marked reluctance to step into the P2P business loans arena.  

    As Sacha Bright, chief executive of business loans and crowdfunding aggregator, Business Agent, said: “We want to see investment in new businesses, particularly start-ups where there is the most need, but we must look at ways to protect vulnerable people through spread of risk and a sensible process of due diligence.”

Related articles

  • Read More

    Winning the SME vote is a contact sport

    Arguably the most crucial General Election in a generation is less than three months away, on May 7 to be precise....

  • Read More

    Mixed response to the Budget

    The Chancellor delivered yet another Budget recently which, as usual, offered a mix of both good and bad news - depending largely on your viewpoint. We spoke to a selection of our clients to see what...

  • Read More

    End of the recession? It's barely half-time

    Neil Edwards, Managing Director of The Marketing Eye, looks ahead to the Budget on 20 March and calls for measures that deliver hope and confidence above all else....

  • Read More

    Feeling the pulse of business confidence

    The recent news that the UK economy is in a double-dip recession makes dismal reading. The Prime Minister described the figures as ‘very very disappointing’ while the Labour leader Ed Miliband...

  • Read More

    Our clients share their views on Budget 2012

    At The Marketing Eye, we always enjoy gathering our clients' reactions to the Budget when it is announced. With a broad range of clients to call upon, our clients' views represent a true...

  • Read More

    Autumn Statement Blues

    George Osborne's Autumn Statement served up few surprises and gave professionals and business owners alike very little to be cheery about. We asked a selection of our clients what they thought about...

  • Read More

    Local SME's should not be bowed by global events

    August was a pretty challenging month for the global economy with the Sovereign debt crisis impacting on the Eurozone, the US credit rating being downgraded and, closer to home, rioting being seen...

  • Read More

    Stick or Twist? Where next for interest rates?

    The Bank of England's Monetary Policy Committee recently announced that UK interest rates are being kept at the record low of 0.5%. This is the 27th straight month that the bank has left rates...

  • Read More

    So, how was it for you? Reactions from local businesses to George Osborne's latest Budget.

    So how was it for you?...

  • Read More

    Local entrepreneurs speak out on Budget wishes

    With the Budget just around the corner (Wednesday 23 March), we canvassed some of our clients a mixture of business owners and professionals for their Budget wishes.Understandably in this climate,...

Take the first step

To find out more about how we can help you grow faster, please get in touch. We'd like to hear from you.  Or try our instant marketing healthcheck, it's free!

Quick Contact

Quick contact


Contact us

T 01825 765617

E hello@themarketingeye.com

Our offices

Full details of our offices in London and Uckfield more

Request a call

'; ';