Today we carry two reports of the potentially damaging impact of Brexit on the alternative-finance sector.
In something of a volte-face the Berlin-based digital-only bank N26 says it will leave the UK and its 200,000 customers owing to the UK’s own decision to leave the European Union at the end of 2020, reports AltFi.
Regardless of the reasoning, the move is a huge blow for its customers and a big surprise for everyone else following the fintech boom in the UK and across Europe. N26 is well funded. Its last funding round hit $170m and it makes no secret of its growth-over-profits strategy.
Fund managers are worried that a Brexit trade deal will see the government scrap or restrict tax breaks on hugely successful investment schemes that have raised billions of pounds for businesses, according to Money International.
“The Enterprise Investment Scheme Association (EISA) wants the government to overhaul the Enterprise Investment Scheme and Seed Enterprise Investment Scheme now the UK has left Europe.
In 25 years, EIS and SEIS have raised more than £20 billion for new and expanding companies in return for offering investors hefty tax breaks.
Yes You Can, rated B, for £30,000 with an 11 per cent fixed yield over five years, is currently 72 per cent subscribed. Project Rhapsody rated A+, with an 8 per cent fixed yield for three years is currently 47 per cent filled. More loan offerings will land on site soon.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 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 2019/20 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.