THE BUDGET may reveal rule changes that could determine the fate of the Innovative Finance ISA (IFISA), the chief executive of Assetz Capital has warned.
The peer-to-peer firm, which lends to small- and medium-sized businesses and property developers, called on investors to watch the chancellor’s speech closely for potential tweaks to current rules that ban IFISA investment through multiple P2P platforms.
“Under the current rules investors are limited to investing through a single platform in any given year, which may be unwise from a risk management perspective,” said Stuart Law.
“The ability to invest through multiple platforms would significantly increase the scope for diversification and is something the P2P sector would greatly benefit from.
“I’d even go as far as to say it could be the difference between the entire scheme being deemed a success or failure.”
The IFISA product was first announced by then-Chancellor George Osborne in 2015 as a way of providing a wider variety of tax-free earnings to retail investors. The wrapper can include P2P investments and crowdfunded debt securities.
Read more: 23 firms now approved to offer IFISAs
Law added that he is also hoping the government will raise the current maximum ISA allowance.
At present, investors can use the tax-free wrapper to receive interest and capital gains tax free up to £15,240. This is set to go up to £20,000 for the next tax year.
“Collectively we are hoping for an increase in the IFISA limit – from £20,000 per year to £25,000,” he said
Read more: The great IFISA conundrum
While Chancellor Philip Hammond is broadly expected to steer clear from any substantial announcements on Wednesday, Law said he may provide some clarification on business rates hikes.
“Another key talking point is likely to be the expected changes to the business rates system that could see some small businesses hit with huge tax hikes, whilst larger companies are predicting to see their bills fall,” he said.
“Companies in the South and Midlands could be particularly hard hit, with SMEs in London predicted to see their bills rise by up to 23.7 per cent.”
More punitive taxation would increase the appeal of P2P funding for SMEs, but also make the lending business more complicated for platforms, he warned.
“If these changes go through as expected it could significantly impact P2P lenders, like Assetz Capital, that provide loans for credit-worthy British SMEs,” he said.