The lending of money to unrelated individuals or ‘peers’ without going through a traditional financial intermediary such as a bank, has been championed by the government who have been consulting on ways to boost peer to peer (P2P) lending.
The Chancellor announced that steps will be taken to make P2P lending more attractive by allowing those lending money through P2P platforms to offset any losses on loans which go bad against any gains they make on other loans. This new bad debt relief will be effective from April 2016 where individuals will be able to make a claim via their self-assessment tax return, for relief on losses incurred from April 2015.
The government will also review the financial regulation which currently stands in the way of institutional lending through P2P and will consult on whether to extend ISA eligibility in relation to investment in P2P lending platforms.
These announcements will provide a boost to P2P lending and the bad debt relief in particular will be welcomed by investors where it has been reported that an increase in earnings of up to 25% could be achieved.