P2P lending within an ISA by 2015?

Fingers crossed

I don't follow.  Could you please explain?

It is more than a rumour. As the link says, a working party set up by the Treasury is exploring ways to include p2x in a stocks and shares ISA wrapper [my emphasis] potentially from 2015. My impression from the TC forum is that the Treasury is serious about this. Obviously it will require some change to the law.

If it does happen, it is not yet clear how it will be implemented. It may not be as easy or flexible as we might hope. I have a stocks and shares ISA with TD Direct. I doubt very much that I will be able to simply invest directly in my favourite p2p platforms through their site, and certainly not in individual loans. How would the provider of the wrapper get paid, for a start?

More likely, I think, are pooled funds of some kind, with a management fee. ISA wrappers might be offered by the p2x platforms themselves (at least the larger ones), or it might be possible to purchase p2x funds through other ISA wrapper providers (who would receive a commission paid by the fund manager out of the management fee). Whether the tax saving is enough to pay for the inevitable fees remains to be seen. There may be little net benefit for basic rate taxpayers, after fees.

One thing that worries me is the Treasury may see ISA wrappers as an excuse not to sort out the non-deductibility of loan losses, on the basis that in a tax free wrapper it does not matter. That would be very annoying.

PS I am sure that p2x will not be made eligible for cash ISAs, for two reasons: (1) it is not what they have proposed; (2) it would go against the thrust of p2x regulation. The FCA is keen for investors to understand that p2x investments are not like cash deposits - they are riskier and not guaranteed.

You are right of course. They will be taking a platform fee, instead of trail commission.

I still expect the structure to be fund managers run p2x funds, which the wrapper providers make available on their platforms. TD Direct's platform fee for unit trusts etc is 0.35% and I guess that might be their fee for p2x, to which you'd need to add whatever the fund manager charges. My guess is the total fee (platform fee + fund manager's fee) will be close to 1%. Some p2x funds may also run their own wrappers, but I suspect the total fee is still likely to be of that order. I think most p2x investments will pay about 5% net of losses (Isepankur may be an exception) in which case 1% fees will equal the tax saved for a basic rate taxpayer.

Not mentioned in the statement but it is in the budget document -www.gov.uk/...../37630_Budget_2014_Web_Accessible.pdf


as is the lifting of the restrictions on maturity dates on securities in ISAs which helps pave the way for P2P lending.

As yet I can find no mention of tax changes for loses on loans though.

Its difficult to work out when though as there is no date, however the associated numbers in table 2.1 item 9 suggest that cost to the Government is going to be negligible until the 2016-17 tax year, which would indicate that the change is immediate (2014-15 tax year) as the cost is neither  - (not applicable) nor 0. 

 batchoy I agree having now read the document. This will need clarification in due course. I would expect comment from Christine Farnish is not too far away and she will no doubt have all the details.