"Crowd bonds are actually a very simple form of lending that is, in many ways, less complex and risky than stocks and shares"
Launched in April 2016, the IFISA first offered the opportunity to invest in peer-to-peer lending.
Crowd bonds allow investors to lend to UK businesses via bonds secured against the firm's operational assets, which arguably makes them lower risk than unsecured loans.
Crowdfunding platform Downing Crowd believes that crowd bonds "look set to become a popular addition to the IF ISA", as many investors seek to further diversify their portfolios, thanks to the rise in the annual ISA allowance from £15k to £20k.
The tax-efficient wrapper will also allow crowd bond investors to keep everything with no income tax payable on the interest earned above the £1,000 personal savings allowance.
Downing Crowd added: "It's true that a lack of understanding amongst investors often sees different types of crowdfunding lumped together as being too risky. But crowd bonds are actually a very simple form of lending that is, in many ways, less complex and risky than stocks and shares, particularly when you consider the amount that events such as Brexit have wiped off markets recently. Provided that investors are fully aware of the relevant risks involved then this extension of the IF ISA could create some very exciting opportunities for UK investors."
