Crowdfunded debt securities will be allowed within Isas from next year, the Government has confirmed.
In the March Budget the Government announced it would consult on whether to extend eligible Isa investments to include investment-based crowdfunding.
In its response to the consultation published today, the Government says Isas will be extended to crowdfunded debt securities from autumn 2016.
However, equity crowdfunding will not be included at this stage. The Government says it will work with the industry to further explore the case for this.
The Government says some respondents to the consultation argued equity crowdfunding is higher risk as the market caters for riskier businesses and is less likely to provide regular returns.
Hargreaves Lansdown chartered financial planner Danny Cox says the move is welcome as equity crowdfunding has less investor protection than debt crowdfunding.
He says: “Both equity and debt-based crowdfunding could potentially be a large market benefiting investors and UK plc. Crowdfunding projects range hugely to the extent that only those which offer genuine investment as either debt or equity should be described as such.”