The government will introduce an Innovative Finance Isa for loans arranged through a peer-to-peer platform from April 2016.
It has also launched a consultation into whether the list of Isa-eligible investments should be extended to include debt securities and equity offered via a crowdfunding platform.
Nick Harding, chief executive of Lending Works, said: “The inclusion of peer-to-peer in Isas should be celebrated.
“It will enable lending platforms like Lending Works to continually grow, maintain high lending capital volumes, and so be able to offer market-beating interest rates to lenders.
“Until banks and building societies canprovide similarly high-interest, low-fuss investment options, we welcome all government support that incentivises individuals to make peer-to-peer lending a part of a diversified investment portfolio.”
Last year, the then coalition Government consulted on its plans for allowing loans made through P2P platforms to become Isa qualifying investments.
A summary of the responses published today said the majority of respondents were broadly supportive of the proposals.
Draft legislation will be published for technical consultation later this year, with a view to legislating to allow peer-to-peer loans to be held in an Isa from 6 April 2016.
A new consultation into whether debt securities and equity offered through crowdfunding platforms should also become Isa qualifying investments was launched today.
It said: “The government notes that crowdfunded investments do share some of the characteristics of investments that can already be held within an Isa.
“Notably, it is the case that debt and equity securities have already been approved to be held in an Isa under specific circumstances, such as when listed or admitted to trading on a recognised stock exchange.
“Crowdfunded investments are subject to the same strict regulatory environment as other financial products and the platform itself is required to have specific authorisation by the FCA, and must abide by relevant marketing restrictions and appropriateness tests.”