Savers will be allowed to hold crowdfunding debt within their ISAs from autumn next year, the government has announced.

The Treasury has announced that the Innovative Finance ISA, which will launch in April next year and allow investment in peer-to-peer loans, will be widened to include crowdfunding debt from the autumn.

Crowdfunding debt is similar to peer-to-peer lending, although the businesses lent to can be at an earlier stage of development, and in some cases the loans are made over much larger periods. Debentures, or loan stock, offered by the Abundance crowdfunding platform, for example, typically last 15 to 20 years.

'The government believes there is a strong case for allowing crowdfunded debt securities issued by companies to be held in ISAs,' said the Treasury in documents published alongside the Autumn Statement.

'This will provide ISA holders with greater choice over how to invest and will support the crowdfunding sector to grow as a source of alternative finance for business.'

However, the government held fire on allowing shares in crowdfunded start-ups to be held in ISAs, after respondents to its consultation flagged the risks they presented for investors.

'Several respondents argued that equity crowdfunding is currently less likely to meet [the government's] consumer protection principle than crowdfunded debt securities, highlighting factors such as uncertainty over investment returns, risks that shares are diluted in future funding rounds, and the lack of consistency over information provided to potential investors,' said the Treasury.

The government said it would work with the crowdfunding sector to determine whether these shares could ultimately be admitted to ISAs.

Bruce Davis, co-founder of the Abundance platform, said he expected that only debt which was tradeable and transferable would be allowed in ISAs. That would rule out mini bonds, which cannot be traded.

Danny Cox, chartered financial planner at Hargreaves Lansdown, welcomed the news. 'Extending qualifying ISA investments to debt crowdfunding but holding back on equity crowdfunding is a sensible move,' he said. 'Debt securities have much better investor protection than equity.'

ISA allowance frozen

Separately, the government announced that the ISA allowance for next year would remain frozen at this year's £15,240 level. It was a predictable move, as the government typically relies on September's inflation figure to determine the following April's ISA allowance. In September, prices dropped, with the UK falling back into deflation, where it remained in October.

But Andy Bell, chief executive of online stockbroker AJ Bell, said it was nevertheless disappointing. 'I'd like to see the government increasing those allowances in years where low inflation or deflation would not result in a natural increase,' he said.

Maike Currie, associate investment director at fund group Fidelity, said the freeze was 'a kick in the teeth for ISA savers'.

'The increase is typically based on September's inflation figure and while we have been in negative territory, any increase would have been welcome for the nation's savers.'