TAKE-UP of the Innovative Finance ISA (IFISA) has been hampered by the personal savings allowance and the slow regulatory authorisation process, the Office for Budget Responsibility (OBR) claims.
The government’s independent public finances watchdog questioned why subscriptions for the tax wrapper were so low in the last financial year, within its report on economic outlook to coincide with the Budget on Wednesday.
“One likely reason for this shortfall is the subsequent Budget 2015 measure on the personal savings allowance, which allowed many investors to retain interest income tax-free without the need for an ISA,” it said.
“Both policies took effect in April 2016. A second reason for lower than-expected take-up reflects some of the largest platform providers taking longer than expected to gain authorisation from the Financial Conduct Authority (FCA).”
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The biggest peer-to-peer lenders such as Zopa and Funding Circle were absent from the IFISA market in the last tax year as they had not received full FCA permissions.
The OBR document puts IFISA subscriptions at £20m across 2,000 accounts, claiming this is from HMRC.
However, the taxman has previously said there were £17m subscriptions, a figure that has been queried as being too low by peer-to-peer lenders.
In comparison, there were 8 million cash ISAs and 2.5 million stocks and shares ISAs opened in the same year, valued at £39bn and £22bn respectively.
Zopa and Funding Circle have since received authorisation since the end of the last tax year, potentially attracting more attention – and volumes – to the IFISA market.
Read more: HMRC’s IFISA numbers come under scrutiny