Chancellor George Osborne’s announcement in the Budget that peer-to-peer loans are to be allowed into the New ISA (NISA) represents about the biggest shot in the arm so far for the P2P movement. It’s not yet clear when this change will come into effect - all the Treasury has said so far is that it will launch a consultation later this year on how to implement its plans. This could involve P2P platforms launching their own NISA wrappers for lenders to use and/or existing providers widening the range of assets they can accept to include P2P loan parts. A Treasury working party that includes representatives from the P2P platforms as well as traditional investment platforms is considering the issues and will help to frame the consultation.
There is much to gain for the P2P industry in these changes. The increase in the annual NISA allowance from £11,880 to £15,000 from this July will significantly boost the potential size of the ISA market. But beyond that, allowing P2P loans into NISAs will help to make P2P lending a mainstream choice for a much larger group of people. This should significantly accelerate the movement’s growth as well as addressing one of the key complaints about the existing regime among individual lenders: that they cannot write off losses against profits for tax purposes.
To give an idea of the size of the opportunity that now confronts the P2P lending industry, consider the latest ISA statistics, covering 2012-13:
- 14.6 million adult ISA accounts received subscriptions – 11.7 million Cash ISAs and 2.9 million Stocks & Shares ISAs
- Total subscriptions: £40.9 billion into Cash ISAs. £16.4 billion into Stocks & Shares ISAs
- Average subscriptions: £3,501 per Cash ISA. £5,629 per Stocks & Shares ISA
