Innovative Finance ISAs (IFISAs) were launched in 2016 to create a peer to peer lending ISA, allowing investors to include peer-to-peer loans within the tax-free ISA wrapper. This new category of ISA sits alongside Cash ISAs, Stocks & Shares ISAs and the newly-introduced Lifetime ISA, giving customers a wider range of ways to save or invest tax-free. The Government sets an annual ISA allowance for each tax year which is the maximum that individuals can pay into ISAs in that year. The allowance for the 2017/18 tax year is £20,000, and this can be split across the ISA categories. You can only pay money into one of each kind of ISA in each tax year.
We launched the LendingCrowd Innovative Finance ISA in February 2017, enabling you to earn tax-free returns* on your LendingCrowd investments. There are two options for investing in ISAs with us: the new Self Select ISA and the Growth ISA. This blog looks at each of these accounts to help you decide which is right for you.
The Self Select ISA
We launched the Self Select ISA at the end of May 2017 to allow you to choose your own ISA investments. You can choose to invest in either new or existing loans through the Loan Market and your returns will be tax-free*. The minimum investment is just £20 and you can invest up to the ISA limit of £20,000.
New loans — bid in an online auction where you decide how much you would like to lend to each borrower, and at what interest rate.
Existing loans — buy loans from other investors on our Loan Market. There is no bidding involved and you can invest instantly.
The estimated return for 2017 is 7.27%* after fees and estimated bad debts. To achieve this return you must continually reinvest your capital. It is important to diversify your portfolio to spread your investment across as many loans as possible. Read more about the risks associated with investing on our Risk Matters page.
There is no fixed term for the Self Select ISA and you can withdraw your funds at any time. If you want to sell your investments to other investors there is a 0.5% sale fee. There is also a 1% ongoing management fee taken on the capital you have invested.
*Capital at Risk. Tax treatment depends on the individual circumstances of each client and may be subject to change in future.
The Growth ISA
In contrast to the Self Select ISA, the Growth ISA invests your funds automatically in the loans on our Loan Market. This account allows you to build a portfolio of loans quickly and earn tax-free returns** without having to spend time choosing your own investments. Your funds will automatically be diversified as far as possible and there will always be at least 20 loans in your portfolio so that no more than 5% of your funds are invested in any one loan.
You’ll receive monthly repayments of capital and interest which will be automatically reinvested, increasing your diversification over time. Read more about the risks associated with investing on our Risk Matters page.
The Growth ISA has a target rate of 6% p.a.** and you can invest from £1,000 up to the ISA limit of £20,000. There is no fixed term and you can withdraw your funds at any time, but please note that there is a 1% exit fee calculated on the amount you are withdrawing.
**Capital at Risk. This is a variable target rate and is net of ongoing management fees and estimated bad debts, but before the 1% exit fee. Tax treatment depends on the individual circumstances of each client and may be subject to change in future.
Transferring an existing ISA
You can transfer existing Cash, Stocks & Shares and Innovative Finance ISAs to us to increase the amount you’re investing in ISAs with LendingCrowd. You can make either full or partial transfers from ISAs opened in previous tax years, and full transfers from ISAs opened in the current tax year.
Simply print off and complete the ISA Transfer Authority Form and send it to us by post – we’ll take care of the transfer with your existing ISA provider. For more information on transfers, visit the ISA Information Hub.
We have designed the Self Select ISA and Growth ISA to be flexible, so if you decide to withdraw money from either of your LendingCrowd ISAs, you can replace the amount withdrawn without affecting your annual ISA subscription limit.
We hope you enjoy investing in our ISAs and earning tax-free returns with LendingCrowd. We welcome your suggestions for features we could add or improve so please email email@example.com to give us your feedback!