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Innovative Finance ISA information hub

LendingCrowd IFISA FAQs

 

What’s an Innovative Finance ISA?

The Innovative Finance ISA (IFISA) lets lenders include their peer-to-peer loan holdings in an ISA. This means there’s no tax to pay on your returns. It’s subject to the same rules on eligibility and contribution limits as other types of ISA. Please note that tax treatment depends on the individual circumstances of each lender and may be subject to change in future.

How can I find out more about the LendingCrowd IFISA?

We offer three IFISAs for peer-to-peer lenders – the Growth IFISA, the Income IFISA and the Self Select IFISA. These accounts are the tax-efficient way to lend with our Growth Account, Income Account and Self Select Account. Tax treatment depends on the individual circumstances of each lender and may be subject to change in future.

LendingCrowd Growth IFISA

The Growth IFISA is aimed at lenders who want a quick and simple method of creating a diversified portfolio of business loans. It automatically diversifies your funds across the loans available on our Loan Market and the minimum deposit is £1,000.

Your repayments will automatically be used to purchase new loan parts on your behalf, diversifying your portfolio further. If your portfolio value is between £1,000 and £1,999, no more than 2% of your funds will be lent to any one business. This maximum target exposure reduces to 1% for portfolios of between £2,000 and £4,999, and to 0.5% for portfolios of £5,000 and above.

With the LendingCrowd Growth IFISA, you don’t need to spend a lot of time choosing loans and constantly monitoring your portfolio – we do all this for you. There’s no fixed term and you can sell loan holdings on our Loan Market if you want to withdraw your funds. There’s a withdrawal fee of 1% of the capital withdrawn. Please note that the time taken to access your funds depends on how quickly your holdings are sold. The ability to sell depends on other lenders buying your loans.

 

LendingCrowd Income IFISA

The Income IFISA is designed for those seeking to generate a consistent level of income from a lump sum without eating into their capital. It works in a similar way to our Growth IFISA, with your minimum deposit of £1,000 automatically spread across the loans available on our Loan Market.

The key difference is that your interest payments are transferred to a separate account for you to withdraw – with no fees – while your capital repayments are automatically lent out.

If you want to withdraw your funds, you can sell loan holdings on our Loan Market, but you must maintain an account value of at least £1,000 for the platform to continue lending on your behalf. There’s a withdrawal fee of 1% of the capital withdrawn. Please note that the time taken to access your funds depends on how quickly your holdings are sold. The ability to sell depends on other lenders buying your loans.

 

LendingCrowd Self Select ISA

The Self Select IFISA is for experienced P2P lenders who have the time to hand-pick which businesses they want to lend to, making sure borrowers match their appetite for risk. To achieve good returns, you’ll need to lend out your capital and interest repayments on a regular basis. The minimum deposit is £20.

You can either can bid on new loans in an online auction by choosing your interest rate and bid amount, or buy loans from other lenders on our Loan Market. Each month you’ll receive repayments of capital and interest from each loan.

We strongly recommend that you review each business carefully and spread your money across multiple loans. Remember that diversification is key to mitigating risk.

If you want to sell loan holdings, you do this on our Loan Market. There’s a 0.5% fee for selling your loan parts. Please note that the time taken to access your funds depends on how quickly your holdings are sold. The ability to sell depends on other lenders buying your loans.

 

Can I transfer existing ISAs to LendingCrowd?

Yes. To get this process started, download and complete our ISA transfer form and post it to us. We’ll take care of the entire transfer process.

If I transfer an existing ISA to LendingCrowd, will it maintain its tax benefits?

Yes. Making a provider-to-provider transfer ensures your ISA maintains its tax-free status. Tax treatment depends on the individual circumstances of each lender and may be subject to change in future.

Can I lend more than the ISA limit with LendingCrowd?

You can lend as much as you want with LendingCrowd, but you have to adhere to the ISA allowance within the LendingCrowd IFISA. If you’ve subscribed to the maximum amount in your LendingCrowd IFISA (£20,000 for the current tax year) and want to lend more, you can do so via our Growth Account, Income Account or Self Select Account.

How much is the ISA allowance?

For this tax year, you can contribute a maximum of £20,000 to ISAs.

What happens if I pay too much into my IFISA?

We prevent you exceeding the ISA allowance for each tax year. However, if you have more than one ISA provider, it’s up to you to make sure you don’t exceed the ISA allowance across all your accounts. If you do exceed that total, HM Revenue & Customs will tell you and your ISA provider about any action that needs to be taken.

I have a LendingCrowd account but I haven’t opened an IFISA. How can I do this?

It’s quick and easy to open a LendingCrowd IFISA once you’re registered with us. Log in to your account, choose the IFISA you’d like to open and follow the instructions. We’ll already have your details, so all you’d have to do is tell us your National Insurance number and accept the ISA declaration and terms.

What are the tax benefits of a LendingCrowd IFISA?

Within a LendingCrowd IFISA, you don’t pay tax on interest earned from peer-to-peer loans. Please note that tax treatment depends on the individual circumstances of each lender and may be subject to change in future.

What interest rate could I earn?

The Growth IFISA has a target rate of 4.6%* a year, the target rate for the Income IFISA is 4.2%* and rates for the Self Select IFISA start from 5.95%**.
*Capital at risk. Target rate is variable, net of ongoing repayment fees, estimated bed debt and before the 1% capital withdrawal fee.
**Capital at risk. Investors can lend at rates between 5.95% and 14.25% based on LendingCrowd’s Credit Bands. Interest rates are guided by the credit grading allocated to each loan. Higher risk investments may yield greater returns but can also lead to lower returns if the business can’t fully repay its debts. This is known as bad debt. Find out more at our Risk matters page.

Is the rate of return guaranteed?

No. The rate of return depends on the performance of the loans in your portfolio. Please remember that your capital is at risk when lending to businesses.

Is there any risk involved?

There is a risk that the value of your loan holdings could fall. The main risk is that the companies who borrow money fail to make their repayments. We have a rigorous credit-screening process so that we fully understand the risk exposure for each borrower. You can see the performance of our loan book to date on our Statistics page. You can read more about the risks of lending to businesses on our Risk Matters page

Can I make a monthly deposit into my IFISA?

Yes. You can set up a standing order from your bank to pay into your LendingCrowd IFISA on a regular basis. You can stop and start your regular payments or change the amount at any time – you’re in control. We’ll tell you if you exceed the ISA subscription limit with us.

What are the fees?

To learn more about our fee structure, please visit our fees page.

Can I have more than one IFISA?

Yes, but you can only contribute in one IFISA in any single tax year.

How many ISAs can I have?

In a single tax year, you can open and contribute to one Cash ISA, one Stocks & Shares ISA, one Lifetime ISA and one IFISA. The total you pay in must not exceed £20,000 this tax year.

Who can have an IFISA?

Anyone who is at least 18 years old and is resident in the UK. You can also apply if you’re a Crown employee (such as a member of the armed forces or civil servant) serving abroad, or the partner of a Crown employee. You don’t need to be a taxpayer to have an ISA but you must have a National Insurance number.

Can I open an ISA on behalf of someone else?

Only if you have a lasting power of attorney for the person you want to open the ISA for. If that’s the case, please call us on 0345 564 1600 to discuss the application.

Do I have to declare my ISA earnings on my tax return?

No. Your ISA earnings are exempt from tax and there’s no need to declare them, provided you meet the ISA rules. Our tax statement excludes your earnings within your ISA. Tax treatment depends on the individual circumstances of each lender and may be subject to change in future.

How do I make a withdrawal from my Growth IFISA or Income IFISA?

Simply go to the withdrawal section of the Manage page and change your Cash Reserve target to the amount you’d like to withdraw. Some of your loans will be sold to reach this target amount, and you can then transfer the cash to your Self Select Account to withdraw it. Please note there’s a withdrawal fee of 1% of the capital withdrawn from the Growth ISA or Income ISA. LendingCrowd oversees this entire process on your behalf and we’ll automatically seek buyers for your loans on the Loan Market. We’ll do this as quickly as possible but please note that the ability to sell depends on other lenders buying your loans. However, repayments from the loans you hold will also be set aside and contribute to your requested withdrawal amount. You can’t list non-performing loans (those that are overdue, in arrears or marked as a default) for sale until they’re performing.

How do I make a withdrawal from my Self Select IFISA?

You first have to list the loans you want to sell. Listing loans for sale will place them on the Loan Market for other lenders to buy. The ability to sell your individual loans depends on other lenders buying them. You still earn interest while the loan is on the Loan Market and money due to you will be paid at the end of the month when the borrower makes a repayment. Once your loans have sold, you can transfer the cash to your Self Select Account to withdraw it, or hold it in your Self Select ISA to transfer to another provider. You can’t list non-performing loans (those that are overdue, in arrears or marked as a default) for sale until they’re performing.

How do I transfer my IFISA to another provider?

First you’ll need to list and sell your loan holdings on our Loan Market to return your loan holdings to cash. Once other lenders have bought your loan holdings, you can transfer out the cash value of your IFISA. You should contact your new ISA provider to arrange this.

Is there a fee for making a withdrawal?

There’s no withdrawal fee if you lend through the Self Select ISA, but selling a loan carries a 0.5% fee. The withdrawal fee for the Growth ISA and Income ISA is 1% of the capital being withdrawn.

Can losses on loans held within my IFISA be offset against income from other LendingCrowd accounts?

No, you can’t offset losses on loan parts held within an IFISA against other chargeable gains made on loan parts held outside it.

Is the LendingCrowd IFISA covered by the Financial Services Compensation Scheme (FSCS)?

No, peer-to-peer lending isn’t the same as having a bank or building society account and isn’t covered by the FSCS.

What happens if LendingCrowd ceases to operate its service?

If LendingCrowd was unable to operate the service, lenders would still continue to receive repayments on loans originated with LendingCrowd, because all loan contracts are between borrowers and lenders and would remain valid. Under Financial Conduct Authority rules, peer-to-peer platforms must appoint a third-party standby servicing company to administer the loan book in the event of the platform ceasing operation.

We have appointed a standby servicing company to oversee the repayment of loans should this situation arise. The standby servicing company is also an ISA manager and would continue to administer loan holdings held in a LendingCrowd IFISA. All lender funds are held in a separate client money bank account and don’t form part of LendingCrowd’s assets.

LendingCrowd is working with the British Business Bank to help deliver CBILS loans to SMEs affected by the Covid-19 pandemic. Find out more: