In his latest Autumn Statement, chancellor of the exchequer George Osborne has announced that the list of qualifying investments for the new Innovative Finance Isa will be extended in autumn 2016 to include debt securities, or loans, offered via crowdfunding platforms.
Announced in the March Budget, the Innovative Finance Isa will allow individuals to invest in new types of finance initiatives, tax-free.
Peer-to-peer loans, where private individuals lend to other individuals via pooled funds facilitated through online platforms, were given the green flag by the government in July, with a consultation launched into allowing other forms of crowdfunding.
Innovative Finance Isas will be available from 6 April directly through peer-to-peer lending platforms such as Zopa, Ratesetter and Funding Circle, or via selected fund platforms. They will have the same annual savings limit as regular Isas, £15,240.
HOLDING BACK 'SENSIBLE'
Today's announcement means that other forms of crowdfunded debt aside from peer-to-peer loans will also be allowed in the Innovative Finance Isa.
The government says that it will continue to 'explore the case' for including equity crowdfunding - where individuals can invest in start-up and early stage companies - within Isas.
Commenting on the announcement, Danny Cox, chartered financial planner at Hargreaves Lansdown, says: 'Extending qualifying Isa investments to debt crowdfunding but holding back on equity crowdfunding is a sensible move. Debt securities have much better investor protection than equity.
'In principle both equity and debt-based crowdfunding could be potentially a large market benefiting investors and UK plc.'
However, Cox adds that what is difficult to assess from Wednesday's announcement is whether a 'fair and understandable assessment of business value and risk to capital, income or both' will be available to investors in these schemes at the point of purchase.
Rhydian Lewis, CEO at peer-to-peer lender RateSetter, comments: 'There were no big boosts for savers and investors in today's Autumn Statement, but the chancellor confirmed the Innovative Finance Isa in the July 2015 Budget and we will be ready to offer our Isa product on 6 April 2016.
'This will offer a much-needed middle ground between low-yield cash and high-risk stocks and shares investments.'