Innovative Finance ISA information hub
What is an ISA?
An Individual Savings Account (ISA) is a tax-free* way to save or invest. Each tax year, you get an ISA allowance from the government – this is the maximum amount you can contribute to an ISA (or ISAs). For the current tax year, the ISA allowance is £20,000. There are four main types of ISA – Cash, Stocks & Shares, Lifetime and Innovative Finance. You can have more than one ISA but only contribute money to one of each kind during the same tax year.
This is simply a savings account for your cash, where the interest earned isn’t taxed. It doesn’t count towards your personal savings allowance, which is the amount of savings income (currently £1,000 a year, or £500 if you’re a higher-rate taxpayer) you can earn without paying tax on your interest.
Stocks & Shares ISA
This lets you invest in bonds, funds and the shares of individual companies, with tax-free interest and capital gains.
If you’re 18 or over, this lets you contribute up to £4,000 a year, until you’re aged 50, to save for later life or buy your first home. The government adds a further 25% each year. You must be under 40 to open a Lifetime ISA.
Innovative Finance ISAs
Also known as an IFISA, this category of ISA was launched in April 2016 and allows you to invest in peer-to-peer (P2P) lending without having to pay tax on your returns*. IFISAs can only be provided by P2P platforms that have been fully authorised by HM Revenue & Customs and the UK’s financial regulator, the Financial Conduct Authority. LendingCrowd was one of the first platforms to launch an IFISA and offers three different products, all of which can be held within the same tax-free* wrapper:
- The Growth ISA offers a target rate of 6%** and is aimed at investors who want a quick and simple method of creating a diversified portfolio of asset-backed P2P loans. It automatically diversifies your investment across the loans available on our Loan Market and the minimum investment is £1,000.
- The Income ISA has a target rate of 5.6%** and is designed for those seeking to generate a consistent level of income from a lump sum without eating into their capital. It lets you take an income from the interest earned on your loans while your capital repayments automatically reinvest. The minimum investment is £1,000.
- The Self Select ISA is for experienced P2P investors 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 reinvest your capital and interest repayments on a regular basis. The minimum investment is £20.
*Tax treatment depends on the individual circumstances of each investor and may be subject to change in future. **As an investor, it’s important to remember you’re lending to businesses so your capital is at risk. The target rate is variable, net of ongoing repayment fees, estimated bad debt and before the 1% capital withdrawal fee. LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.
Who can open an ISA?
To open a LendingCrowd Innovative Finance ISA, you must:
- be 18 years old or over
- hold a National Insurance number
- be resident in the UK
If you’re interested in opening an IFISA with LendingCrowd, you’ll need to register as an investor first. You can invest up to £20,000 this tax year and transfer in any other ISAs you hold. 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. LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.