Noble Endeavours

By the time you read this blog, everyone in the industry will have had their say on the intricacies of the Spring budget, so rather than adding to that prolonged media highlight reel, we will sweep through the headlines in this week's blog touching only on what's important to our sector, and then laser focus in on housing and the IFISA. So, we assume everyone is aware of the cuts in the National Insurance, let's say no more about it. If you're here for a morality debate about disposable vapes, disposal of non-doms, or any other contentious topic debated in the budget, apologies in advance; that's not our arena.

Starting with business, the key takeaway points were the VAT registration threshold for businesses increasing from £85,000 to £90,000 whilst reducing capital gains tax rates on residential property from 28% to 24%. The Chancellor also announced the scrappage of the furnished holiday lettings tax regime in April 2025, with around 127,000 properties in the UK currently registered as FHL. Historically, the furnished-letting scheme worth circa £ 300 million a year allows people with second homes to deduct the cost of their mortgage interest payments from their rental income, ergo paying lower capital gains tax when they sell. This kind of multiple-dwelling relief is a hot topic because there is no natural way to win in this scenario; areas of outstanding natural beauty will always suffer from a lack of housing supply, and locals will suffer because of that, but some housing sector professionals have been quick to point out that tempering investment is never a good thing when your main shtick is growth. It's almost as if the answer always comes back to building more houses. One thing that was mentioned in the budget speech of particular interest was Brownfield schemes; this is something that we have "banged the drum" on over the months and will be central to unlocking the supply issues whilst at the same time protecting the serenity of our green spaces, our USP as a nation, the green and not overly developed land as mentioned in the poem.

Moving on to investing, the Chancellor also used the budget speech to promote the offloading of NatWest shares; with a current 31.9% stake in NatWest Group, the investment pitch is a dividend presently yielding 6.8%. These shares will sell, as according to Bloomberg, the bank is reportedly expected to generate nearly £11bn in post-tax profits from 2024-2026. Regardless of what happens going forward, they have had a great rate crisis. The following product up for viewing was the NS&I launching the "British Saving Bond" that would guarantee a fixed interest rate for UK savers for three years, which seems vaguely reminiscent of war bonds, a bit of a fundraiser when times are tough. Then we get to the finale, the British ISA.

Much of the discourse you may or may not read about the British ISA will more than likely be negative or a bit cynical, but to completely buck the trend, we are going to say that it's a good idea, just maybe not for the reasons you may think. To provide some quick context, the project aims to encourage investment in UK companies and reboot interest in London's stock market. The issue people will have is that you only have to look at comparable performance over the last 60mths between the FTSE 100 (7.97% + in five years) and the S&P 500 (85%+ in five years) to see that currently investing in international companies is far more profitable, so even though encouraging investment in UK capital markets is a noble endeavour that we would support, the whole ethos behind any successful investment portfolio is diversification, and limiting one's approach in a globalised market presents an obvious challenge.

So why is it a good idea, and why haven't we mentioned the IFISA yet, given we are already in paragraph five? There will be a lot of voices out there wanting to simplify the ISA market, some for noble reasons, some for commercial reasons; we believe in freedom of choice and providing investors with as many choices as possible. The Innovative Finance ISA (IFISA) provides consumers with the chance to get tax-efficient exposure to our asset class, yet some consumers may want an efficient way to get exposure to British businesses as a whole; the more choices that are created, the greater the overall capital inflow, and the correlation between increased consumer choices and increased capital inflow is clear to see over the last two decades.

One point to note is that beyond these key takeaway points discussed in this week's blog, the overall tax burden is rising due to frozen income tax thresholds. More and more UK adults will be pulled into the higher rates in the coming years, so taking advantage of tax-free interest payment allowances is going to become more and more of a consideration for everyone. Exciting products like the Innovative Finance ISA (IFISA) allow lenders to earn tax-free interest, extracting value from servicing the demand of the UK housing market, which is equally as noble of an endeavour.

Invest & Fund has returned over £200 million of capital and interest to lenders with zero losses, showing the rigour that governs our business.

To take maximum advantage of this robust and exciting asset class, please visit www.investandfund.com or contact Shaheel at shaheel@investandfund.com.

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