Budget 2016 — what does it mean for FinTech?

The Chancellor delivered his 8th Budget to a packed House of Commons yesterday afternoon against a backdrop of reduced growth forecasts from the OBR.

Mr. Osborne’s central message was that this was a budget aimed at the next generation, with reforms across education, small business taxes, savings products, and even a sugar levy on soft drinks.

Despite no explicit FinTech reference in his statement, the Chancellor reasserted his intention to make the UK the global FinTech capital, confirming that the Treasury is currently examining the recommendations within the benchmarking report recently published by EY, and will make further announcements in this space over the coming months.

Indeed, perhaps owing to its keen interest in the sector, we have seen trend in the Government keeping the conversation and any announcements relating to the FinTech sector separate from the formal Budget statements, so we expect to hear more from HMT in due course.

In the enterprise space more generally, today’s Budget included a number of tax changes designed to help small businesses. The rate of corporation tax is to be reduced to 17 per cent by April 2020 and the threshold for small business rate relief has been raised from £6,000 to £15,000. Overall, the Government estimates that from April next year 600,000 small businesses will pay no business rates.

There were also benefits for the investor community with higher rate capital gains tax falling from 28 per cent to 20 per cent, the basic rate from 18 per cent to 10 percent and, entrepreneurs’ relief extended to long term investors in unlisted companies. There will also be a surcharge for carried interest and for gains on residential property to ensure there is an incentive to invest in companies over property.

The Alternative Finance landscape continues to improve as Innovate Finance member Funding Options was announced as ​one ​of the designated finance platforms to help match borrowers to alternative lenders where they are rejected for finance by banks. Other designated platforms include Bizfitech ​and Funding Xchange.

The Northern Powerhouse, and regional devolvement more generally, received substantial airtime, with the launch of a number of infrastructure projects aimed at increase connectivity within the UK.

The FCA’s FAMR report released earlier this week suggested technology should play a greater role in lowering the cost of advice. Yesterday’s Budget included the abolishment of the Money Advice Service and confirmation that the Government will consult on introducing a clear single definition of ‘financial advice’. This provides a very interesting horizon for the robo-advice community.

A big ticket item was the proposal to convert all schools to academies, however, slightly buried was a call to look into increasing the number who take maths lessons to the age of 18, which is a step in the right direction towards increasing UK STEM expertise.

Overall, the Government’s message to the FinTech community remains positive with clear measures aimed at increasing productivity and capital investment. The changes in the AltFi and advice space will create further opportunities. We expect to hear more FinTech specific announcements in the near future.