Bank Tax to Stifle Lending
We have previously highlighted the effect of the latest Budget on the Alternative Finance Sector, with the inclusion of the Innovative Finance ISA coming on line in April 2016 and the ability to earn between £500 to £1,000 of interest tax free depending on your tax bracket but it has taken some time for the full effects of other key points to become fully apparent.
The Chancellor announced that he wants to reduce the Bank Levy over the next 6 years from 0.21% to 0.1% but then introduce a new tax of 8% of profits over £25m on the entire banking sector, including building societies and the smaller new ‘Challenger Banks’ whom are currently exempt.
Once the budget dust had settled, the Building Societies have confirmed that this new tax will costs them approximately £630m over the next five years, which translates into a loss of over £20 billion worth of much needed lending to the residential and commercial mortgage markets. This is no small number in a market deprived of capital.
Zopa, the first UK peer to Peer Lending platform for consumer loans, announced yesterday that they have broken the £1 billion loan barrier since they launched over 10 years ago which is amazing and figures from EY published in February expect to see the European alternative finance market top £7.5 billion in 2015.
Will the Alternative Finance Sector be able to plug any of the funding gap caused by the new bank levy, let’s hope so.