Budget 2014: Peer-to-peer loans allowed into Isas

The increasingly popular peer-to-peer (P2P) loans sector received a fillip from the government today when it announced that people would be able to hold p2p loans within an Isa.

In a Budget designed to benefit Britain's savers and investors, chancellor George Osborne's announcement on P2P means they will now be able to access tax-free returns that are usually higher than those offered by traditional high street savings providers.

However, Osborne did not reveal exactly when P2P loans will be included in the Isa wrapper.

Rumours began circulating that the government would announce Isa eligibility for P2P products at the time of the Autumn Statement in December 2013, but Osborne neglected to mention the sector.

P2P websites pair savers and investors with individuals or companies that need to borrow money, acting like middle-men in that they offer a place for the two groups to come together and agree lending arrangements.

The Financial Conduct Authority is set to take regulatory responsibility for the P2P sector in April - a move that will legitimise products that are already used by hundreds of thousands of people in the UK. The Budget announcement will be a further boost to the popularity of P2P.

Kevin Mountford of Money Supermarket said: "The new rules will also allow for peer-2-peer lending to be included within a tax-free ISA allowance which will be particularly beneficial as rates on P2P investments are generally higher than with standard cash savings accounts."

According to data from Funding Circle, 41% of investors said they would invest more in peer-to-peer lending if it was included within Isas; while one in ten people said they would transfer their existing stocks and shares into peer-to-peer lending.

James Meekings, co-founder of Funding Circle said: "This represents a seminal moment for our industry. The inclusion of peer-to-peer lending in Isas ensures British people earn inflation-beating, tax-free returns whilst helping support the country's economic recovery. Today's news will open up peer-to-peer lending to a new audience."

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