The tax break will not apply to income from investments in shares or funds.
In his Budget speech this week, George Osborne said:
"From April next year the first £1,000 of the interest you earn on all of your savings will be completely tax-free.
"To ensure higher rate taxpayers enjoy the same benefits, but no more, their allowance will be set at £500."
In last year's Budget, the Chancellor announced that the government would make peer-to-peer loans eligible for inclusion within ISAs.
An estimated £1.7bn was lent in 2014 through P2P lenders.
Giles Andrews, Zopa CEO and co-founder, said:
"It's fantastic news that The Treasury has confirmed the new savings tax break will also apply to interest earned from P2P lending.
"The news is very exciting as the vast majority of Zopa's 58,000 lenders can now lend tax free from April 2016. I expect this will be a huge boost to the industry and will attract a large number of new consumers to start lending and earn returns of 5+% tax free."
