The government will cater for peer-to-peer lenders by inviting firms to use credit from the British Business Bank, Chancellor George Osborne announced in today’s Autumn Statement.
From April 2015 peer-to-peer lenders will also be able to write off bad debts, as banks currently do.
James Meekings, co-founder of Funding Circle, said: “This change in the tax system will make lending to small businesses via our marketplace much fairer for individual investors, putting them in an equal position to larger lenders such as banks.
“It’s something we have campaigned for since we launched four years ago, so we’re delighted with today’s news.
“More than 35,000 people currently lend through Funding Circle and the average investor could earn up to 25% more overnight per year as a result of this change.
“It will have a hugely positive impact on the peer-to-peer lending industry and is a win-win-win for investors, borrowers and the economy at large.”
Stuart Law, founder and chief executive of Assetz Capital, added: “This is another sign that the government is firmly behind peer-to-peer lending.
“George Osborne has rightly recognised that investors lending through peer-to-peer platforms are the victims of a tax trap, and taken a positive step to help them.
The government also increased its Social Investment Tax Relief to include peer-to-peer.
Bruce Davis, cofounder and chief executive of ethical investment crowdfunder, Abundance, said: “[It] will open up a whole new market for investors who want the ‘win win’ of doing good with their money while still making a good financial return.”
He added: “The Autumn Statement delivered almost all of the peer-to-peer and alternative finance Christmas wishes in one go.
“The extension of the ISA consultation to debt securities means that peer-to-peer investors will also be able to add debentures and bonds into their ISAs – which will revolutionise investment in green infrastructure and other ethical investment projects and mean that Abundance investments would attract ISA tax breaks.”