It seems that things have moved on, in a positive way, from the publication of the Kalifa Review early last year. We reported here on Kalifa’s findings at the time. Now the strength of the UK FinTech offering is widening its powerbase from London to other parts of the UK.
No longer a London-centric phenomenon, fintech prowess has now reached into all corners of the UK. Birmingham, Manchester and the West Midlands are just a few of the now well-established hubs in England, and cities across Wales, Scotland and Northern Ireland are also fast ascending the ranks.
In the context of the government’s Levelling-Up in the United Kingdom whitepaper, released last week, the fintech industry appears to be ahead of the game. It’s a good sector to have as a front-runner too. The industry is now worth over £11bn to the UK economy and constitutes an important contributor to GDP. It is also unique in being one of the few sectors to emerge from the pandemic stronger, as financial services were digitalised and customers migrated online.
In addition to showcasing the home-grown glories of ‘global Britain’ (second only to Silicon Valley), fintech clusters are succeeding in bringing wealth and jobs to formerly less affluent communities. The industry also still holds huge untapped potential, boasting some of the fastest-growing companies in the country.
According to a recent report: “local authority areas that are home to 100 or more high growth companies have an average [gross value added] per head of population of £138k compared to £22k for local authority areas with less than 100 high-growth companies.
Historical Performance And IFISA Process Guide
That figure is the result of over £24 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.