Government Announces P2P ISA Consultation

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Nick Newton
17th October 2014

We’re pleased to see that Government has announced a new consultation for allowing peer-to-peer lending investments to be included in a NISA wrapper. The deadline is 12 December and we thought we would share the press release issued yesterday.

We’re excited by the development because it means lenders get a better deal and once we’ve been given a clear steer on rules and guidance, we’ll create a rebuildingsociety ISA. As an industry, we’re still lobbying for the ability to offset losses against tax too, although this is likely to be a longer process.

A new thread has been created on the rebuildingsociety section of the p2p independent forum for you to post your views, which we will consider before we respond, either individually or with the UK Crowdfunding Association, which we’re a member of.

This is the press release in its entirety:

Plans to enable savers to hold peer-to-peer loans in their Isas which will allow their returns to be entirely tax free have been set out by the Government.

Peer-to-peer (P2P) lenders act as middlemen by matching people who have some money to invest with people or small businesses who want to borrow it.

The potential returns on offer from the fledgling industry can often be much higher for those investing money than they could get from a more traditional savings account, although this type of investment does not have the protection of the Financial Services Compensation Scheme (FSCS), which compensates savers by up to £85,000 if their bank or building society goes bust.

At the moment, the interest that lenders earn from lending money via P2P platforms is taxable, but once P2P loans can be held in Isas then it will be possible to earn interest completely tax free.

Chancellor George Osborne announced an overhaul of Isas in the Budget, which included increasing the annual amount that can be put away tax-free to £15,000. Savers can now choose to hold all of that amount in cash, stocks and shares, or any combination of the two.

Mr Osborne also announced in the Budget that Isa eligibility would be extended to include P2P loans in order to broaden savers’ choices over how they invest.

The Government today launched a consultation into how best to implement these changes, including asking whether P2P loans should be included in existing stocks and shares Isas, or whether there should be a new third type of Isa which they could come under.

The move could provide further opportunities for savers who are still struggling to get decent returns for their money.

According to financial website Moneyfacts, of the 833 savings accounts on the market, including Isas and non-Isas, only 322 pay enough interest to beat the effects of tax and inflation.

Financial Secretary to the Treasury David Gauke said: “P2P lending is an exciting, innovative new sector and it’s right that investors who want to lend money via P2P platforms should be able to hold these loans in their Isa alongside more traditional investments.”

The P2P sector is growing rapidly and to date, more than £1.6 billion has been lent through it.

The consultation will close on December 12 and the Government will then look at amending legislation so that P2P lending can be included in Isas.

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