The Innovative Finance ISA had a slow start but confidence is growing among retail investors.
Investors increased the average amount they invested in the Innovative Finance Individual Savings Account (IFISA) in the 2017/18 tax year by 30 per cent, according to data collected by HMRC.
The numbers, the latest available, were released last week and show the growth of the IFISA tax wrapper first mooted by former chancellor George Osborne in 2015. It launched officially in 2016 but got off to a slow start owing to a regulatory bottleneck.
In the 2016/17 tax year just 5,000 customers opened IFISAs with a total £36m subscriptions (these figures were disputed by some platforms as being too low). In the following 2017/18 tax year this shot up 31,000 investors backing the IFISA with £290m subscribed in the tax year and a total of £366m in outstanding balances in IFISAs at 5 April 2018.
Whilst growth would be expected over this period, with more and platforms allowed to offer the IFISA, the average amount subscribed also increased. In the 2016/17 tax year the average adult subscribed to the IFISA to rose to £9,355 from £7,200 in the previous year, a growth rate of 30 per cent.
A survey of 2000 UK adults conducted on behalf AltFi in December 2017 found Innovative Finance ISA was far from seeing mainstream adoption with more than three quarters of those surveyed by saying they have never heard of the government-backed tax-free alternative investment wrapper.