The Innovative Investment ISA (IFI) became effective from 6 April 2016 and is available to investors aged 18 or over. Along with loan repayments, interest and gains from peer-to-peer loans are eligible to be held within this new type of ISA, without being subject to tax.

This week, Treasury select committee chairman Andrew Tyrie raised concerns the tax break associated with the Innovated Investment ISA could lead to poorly-informed investors taking unnecessary risks.

‘Government policy, letting peer-to-peer investments form part of an ISA allowance for instance, represents a form of official support for investments that may be inherently higher risk,’ he said following correspondence with the FCA and Bank of England over the possibility of further regulating peer-to-peer lending.

The government hopes the IFI will stimulate the small but rapidly growing peer-to-peer lending and crowdfunding market. Peer-to-peer loans are estimated to have totalled £4.4bn in the final quarter of 2015, up from close to zero five years ago.

The draft IFI legislation can be viewed here.