From 6th April 2016, it should be possible to invest tax free in peer-to-peer (P2P) lending within ISAs.
As with other ISAs, you are only able to subscribe to one provider in any tax year – since I have invested in several P2P lenders, I’m likely to convert one of those accounts into an ISA.
Anyway, to explain more in detail about P2P and these new Innovative Finance ISAs, here’s a guest post (a first on this blog!) from Michael Todt of Lending Works:
Peer-to-Peer Lending Continues To Rise in Popularity
The impact of peer-to-peer (P2P) lending on the market for investments and financial services in the UK is no longer the well-kept secret it once was, and this was well illustrated by another stellar year in 2015, in which it reportedly swelled to £3.2 billion – up by some 84% on 2014.
Certainly, the P2P sector has provided a welcome alternative for investors in a climate dominated by record-low interest rates, derisory returns on savings and Cash ISAs, and a hugely volatile stock market. As a lender through these types of platforms, you are forced to take on a risk to your capital, as funds invested are not covered by the FSCS in the event of borrowers (to whom the loans you purchase are allocated) defaulting and/or the platform going bust.
However, the UK’s major platforms have countered this with safety measures such as segregated provision funds, and even an insurance against borrower default in the case of Lending Works. Platforms are also obliged to operate under FCA authorisation as of October 2015 too, while eight of the top P2P providers are members of the P2PFA; an industry body that sets out a strict set of operating standards to which all members must adhere to.
Benefits of the Innovative Finance ISA Continue reading