As part of the Autumn Statement, the UK Government announce that they have extended the list of Individual Savings Account (ISA) eligible investments to include crowdfunded debt securities as part of their commitment to increase the choice of investments available to ISA investors and improve competition in the banking sector.
The announcement follows the government’s consultation that explored whether to allow crowdfunded debt securities and equity in ISA wrappers. The decision favours debt securities, however, it says more work needs to be done before it could allow equity crowdfunding into ISAs.
Debt securities are a way for individuals to lend money to established businesses over a set period in return for interest repayments. Unlike traditional bonds they cannot be traded and are not listed on any market. Inclusion within an ISA will mean returns will be exempt from income tax and capital gains tax, and no tax will be payable on money withdrawn from the scheme. They will have the same annual savings limit as regular ISAs of £15,240.
The government’s decision to extend ISA to crowdfunded debt securities is a really sensible move.
Danny Cox, chartered financial planner at Hargreaves Lansdown, says, “In principle both equity and debt-based crowdfunding could be potentially a large market benefiting investors and UK plc.”
The consultation report said, “The government believes there is a strong case for allowing crowdfunded debt securities issued by companies to be held in ISAs.”
“The government will therefore legislate in autumn 2016 to allow certain debt securities issued by companies and offered via a crowdfunding platform to be held in the new Innovative Finance ISA, which will be available for certain peer-to-peer loans from 6 April 2016.”
The government said it will work with the crowdfunding sector and other interested parties to further explore the case for extending ISAs.
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