Summer Budget 2015: P2P Isas to arrive in April 2016
The peer-to-peer (P2P) Isa is set to launch on 6 April 2016, the government has confirmed in today's Summer Budget.
The not-so-snappily titled Innovative Finance Isa will launch for loans arranged via a P2P platform.
By allowing P2P lenders to use the wrapper for the first time means people who lend their money to others through the company will not be taxed on the interest they make.
The maximum deposit is expected to be in line with that for cash and stocks and shares Isas, which is currently £15,240.
Rhydian Lewis, chief executive of P2P firm RateSetter, said the new Isa will offer investors "a much needed middle ground between low-yield cash and high-risk investments".
He added that based on the current maximum subscription limit, by including their RateSetter investment in an Isa, a higher-rate taxpayer could save around £350 in tax and a basic-rate taxpayer around £175.
"The introduction of the Innovative Finance ISA is great news for hard-pressed investors suffering from pitiful interest rates offered by cash ISAs but put off by the risk and complexity of stocks and shares ISAs," he said.
From the same date the P2P Isa launches, all Isa savers will be able to withdraw and replace money from their accounts within the same tax year without the replacement counting towards their annual Isa limit.
This policy will also cover stocks and shares Isas and not just cash Isas, as previously announced in the March Budget.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.