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Many happy returns to our Innovative Finance ISA


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A year ago, we became one of the first peer-to-peer lending platforms to launch a new kind of ISA that enables investors to lend directly to businesses, with no income or capital gains tax to pay on their returns*. 

Plans for the Innovative Finance ISA (IFISA) were first announced by former Chancellor George Osborne in his Summer Budget of 2015. HM Revenue & Customs said the launch would increase the choice available to ISA investors and diversify the sources of finance available to business.

Our original IFISA product, the Growth ISA, targets a tax-free* return of 6%** a year. It’s designed for those who want a quick and simple way to create a diversified portfolio of secured business loans. By automatically reinvesting interest and capital repayments, the Growth ISA has actually delivered an average return of 8.5%, as shown in the chart below.

chart showing returns for Growth ISA

Please note that past performance does not guarantee future returns. As an investor, it’s important to remember you’re lending to businesses so your capital is at risk.

This average return is well above target and almost three times the current rate of inflation, which is running at 3%. Meanwhile, rock-bottom interest rates mean that the average return for savers in a Cash ISA is little more than 1%, according to personal finance data provider Moneyfacts. As a result, savings held in many Cash ISAs are falling in value once the rising cost of living is taken into account.

Expanded IFISA range 

In January, we expanded our IFISA range with the new Income ISA, which works in a similar way to our Growth ISA. The key difference is that investors can take their interest as income while their capital repayments reinvest automatically. This makes it ideal for people looking to generate a consistent level of income from a lump sum without eating into their capital. The target return for our Income ISA is 5.6%**. 

The longer you hold a Growth ISA or Income ISA the more diversified your portfolio will become, as our platform automatically invests in new loans on your behalf. Spreading investments across as many businesses as possible means the impact is reduced if a borrower can’t repay their loan. 

We also offer the Self Select ISA for experienced peer-to-peer investors who have the time to hand-pick which businesses they want to lend to, making sure those borrowers match their appetite to risk. 

You can easily transfer existing Cash, Stocks & Shares, Lifetime and Innovative Finance ISAs to LendingCrowd. ISA subscriptions from previous tax years don’t count towards this year’s £20,000 allowance, so you can transfer as much as you want to us, subject to a minimum transfer value of £1,000. 

*As an investor, it’s important to remember you’re lending to businesses so your capital is at risk. Tax treatment depends on the individual circumstances of each investor and may be subject to change in future. 

**Capital at risk. Target rate is variable, net of ongoing repayment fees and bad debt. 

Article author

Gareth Mackie

Gareth Mackie

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If you invest through LendingCrowd you should understand that your capital is at risk.

LendingCrowd is the trading name of Edinburgh Alternative Finance Limited, Company Number SC468392, authorised and regulated by the Financial Conduct Authority (Firm reference number 670991). LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

Read more about the risk involved when investing and borrowing.

The company's registered office is 23 Manor Place, Edinburgh, EH3 7DX.

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