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Which ISA offers the benefits you need?

Benefits of ISAs

ISAs shelter your returns on savings or investments from tax, and from April this year (2016) there will be three main types: the cash ISA, the stocks and shares ISA, and the Innovative Finance ISA, which allows you to get tax-free returns with peer-to-peer lending. Here we have a look at the benefits of each type of ISA.

Benefits of a Cash ISA

Save with access to your money: If you would like to be able to make withdrawals from your savings whenever you need, try an easy-access cash ISA. The downside is that rates are typically the lowest out of all the ISAs (usually not above 2.5%*) and that they are variable, sometimes decreasing if you make a number of withdrawals.

You want to keep your money safe for longer with a better return: Rates for fixed-rate cash ISAs are better than easy-access accounts, typically around 2-3%. Your money is locked at a fixed rate for a specified time period, usually between 1 and 5 years, with higher rates for longer terms.

Benefits of a Stocks and Shares ISA

You have spare money to invest over a long time: If you’re unimpressed by cash ISA rates and you’re interested in learning how to manage your investments, a stocks and shares ISA could be right for you. You must be willing to accept the higher risk, and to research which investments are worthwhile or get a professional to invest for you. There is no guarantee you will receive dividends or the same amount of principal back, but investing in shares over a long period of time has the potential to earn you considerably more – according to research conducted by, the average return for a stocks and shares ISA in the 2014/15 tax year was 7.4%*.

Benefits of an Innovative Finance ISA

You want higher returns and aren’t put off by risk: Peer-to-peer returns will be included in the Innovative Finance ISA from April 2016. This investment option typically offers a rate between 5-10%* and attracts investors who are not satisfied with cash savings rates and are prepared to take risks for potentially higher returns. As with investing in shares, there is no guarantee that you will receive all of your money back if individuals or businesses you lend to do not repay their loans. Peer-to-peer is not protected by the Financial Services Compensation Scheme like cash ISA savings are, although some platforms have some funds put aside to cover investor losses in the case of borrower defaults. Peer-to-peer should be used alongside less risky investments, and investors should spread their capital over many different loans to protect their overall return rate from individual borrowers defaulting on their loan

Benefits of Other ISA Types

You want to buy your first home: Help to Buy ISAs are a type of cash ISA launched in late 2015. If you are a first-time buyer saving towards buying a home, the government will boost your savings by 25% up to a bonus limit of £3,000. If you are buying a home with someone else you can each open a Help to Buy ISA, allowing you to receive a bonus of £6,000 if you buy with a partner.

Save money for your children: Junior ISAs allow you to save or invest money for your child, which they can access when they’re 18. You can choose a cash Junior ISA or a stocks and shares Junior ISA depending on whether you wish to save or invest up to a limit of £4080 per year. The Innovative Finance ISA may also be available in Junior ISA form after its launch.

Split your ISA allowance between different types: While you are only able to open one of each type of ISA within a tax year, you can mix and match between cash, stocks and shares, and the Innovative Finance ISA in any combination as long as your combined savings in any type of ISA do not exceed the ISA limit for a year, which is currently £15,240.

*All figures correct as of March 2016

Innovative Finance ISA

Article author

Lending Crowd

Lending Crowd


  • Avatar PhilG says:

    This is a good generic article that explains the ISA landscape. However I am fully invested in ISAs and have been for many years. I would like to know more about the specific details of the new Innovative ISA and specifically those of Lending Crowds offering. For example:

    Whats the savings cap and how does it translate to other ISA caps; will you accept transfer ins from other ISA products; is there a time bar on withdrawals…

    I am keen to invest but in the absence of information its impossible to carry out due diligence,

    • Avatar LendingCrowd says:

      Thank you very much for your comment on our blog. We’d be delighted to answer specific questions related to the new Innovative Finance ISA.

      From April 6th 2016, the maximum ISA investable allowance will be £15,240, which can be invested between the three types of ISAs – cash, stocks & shares (S&S) and the Innovative Finance (IFISA). The government announced in this year’s budget that the allowance will rise to £20,000 from April 2017.

      At present, you may only open one of each type of ISA per year and invest your £15,240 allowance between them. For example, you might want to invest £15,240 in one type of ISA, such as the cash ISA, or perhaps you might prefer to split your money £3,000 into cash, £1,000 in S&S and £4,300 in the IFISA (this combined total should not exceed £15,240).

      We are still finalising our IFISA product as only lenders with full FCA authorisation are able to offer this product. To date only three peer-to-peer lending companies have been fully authorised by the FCA.

      If you would like to sign up for updates on our Innovative ISA page we will release more information when we know more. –

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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.

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