As we near the 2016/2017 April tax year end, time is running out for platforms to finalise their Innovative Finance ISA products. The widely awaited IF ISA (Innovative Finance ISA) will allow UK investors to place their peer to peer investments within a tax-free wrapper, up to £15,240 for 2016/2017 and rising to £20,000 next year.
This regularly updated page keeps on top of the companies who currently offer a fully functioning P2P ISA (not just the ‘coming soon’ version!)
Who Offers a Working IF ISA?
Last updated: 26th February 2017
- Abundance Investment (historic 2016 investments offered 5% – 12% gross IRR/ interest)
- Crowdstacker (current lending opportunities from 5.5% to 7%)
- Crowd2Fund (“earn estimated 8.7% return”)
- Landbay* (“3.75% annualised return”)
- LandLordInvest (“up to 12%”)
- Lending Crowd* (target 6%)
- Lending Works* (4%-4.5%) – demand is high and Lending Works release in tranches. They sold £2.5million in the first 24hrs, as of midday 17/02/17 they released a new £5million tranche.
We hope there will be many more to come before the April deadline. Plenty of platforms have passed the first hurdle (full FCA authorisation) but now need to get ISA authorised manager status and update their investment products on their website. You can also view the official list maintained by HMRC which tracks companies with ISA authorised manager status. A great up to date source of information on IF ISAs is here on the P2P Independent Forum.
You can also get exposure to Peer-to-Peer loans via P2P Investment Trusts in a traditional stocks and shares ISA (read more here).
Screenshot from the Lending Works Innovative Finance ISA Launch
What is the Innovative Finance ISA (IF ISA?)
An ISA is an ‘Individual Savings Account’, which acts as a tax free savings vehicle. The UK government introduced them in 1999 to encourage people to save. ISAs are free from capital gains and income tax. You can deposit up to £15,420 into an ISA in the 2016/2017 tax year and your deposits remain in the ISA vehicle for future years. In the past, if you withdrew money this could not be replaced without using more of your £15,420 quota. However from 2016/2017 some providers may offer a ‘flexible ISA’ that allows you to replace withdrawals in the same tax year with no penalty.
Innovative Finance ISA Deadline
The UK tax year runs from 6th April to 5th April. So, if you want to make the most of your quota, invest as much as you can before April 5th 2017. At least for P2P investments, expect that there will be a big rush and some providers may close their doors to new investments altogether. Just look at what’s happened with the Lending Works ISA: £2million funded in 24 hours and closed to new investment until further notice. I’m planning to leave my decision until mid-March at the latest before deciding who to go with.
It is possible to transfer in previous years non-IF ISAs to this years IF ISA (at least according to Funding Circle and RateSetter’s video below). So if you don’t find an ISA to suit you, one option could be to put it in a general cash ISA and move it next year.
Other Types of ISA
Innovative Finance ISA’s join a list of existing ISA products:
- Cash ISAs. An FSCS protected, interest paying account. In recent years these have become less attractive as the % returns fell so much.
- Stocks and Shares ISAs. These allow you to purchase stocks through a broker such as TD Direct Investing or Halifax Share Dealing. You don’t have to pay capital gains tax on share price rises. In the past you still had to pay a 10% tax on dividends, but as of 2016/2017 you no longer have to pay tax on dividends from a Stocks and Shares ISA.
- Junior ISAs. These are to encourage parents to save on their childrens’ behalf. The allowance is lower: £4,080, but you can start as soon as the child is born. Your child cannot access the money until they are 18.
- Help to Buy ISAs. Designed to encourage people to save for a house, and pays a bonus on first home purchase. These are being phased out by the newer Lifetime ISA.
- Lifetime ISAs. These are coming in the 2017/2018 tax year. You put in up to £4,000 a year and the government adds £1,000 (25%), up to the age of 50. You can only use it to buy a house, or withdraw after the age of 60 (though you can withdraw earlier with a penalty).
In general you can only open one of each type of ISA each year, but you may be able to split your allowance between the 3 distinct types (e.g. 40% cash ISA, 40% stocks and shares ISA, 20% Innovative Finance ISA).
Here’s a couple of videos from RateSetter and InnovativeFinanceISA.org.uk that provide a little more information:
*Links marked with a star are affiliate or refer a friend links, which goes towards helping us to maintain this site and produce new content. If you register as a new customer with Landbay or Lending Works you ‘might’ get a £50 bonus, however this link was intended for the standard investor accounts and it is unclear if they work for ISAs too.