Innovative Finance ISA Guide – Where and How To Invest

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Innovative Finance ISA

The Innovative Finance ISA Guide

Finally, the peer to peer Innovative Finance ISA (IFISA) is here and available for investors to use. Well mostly anyways. There is still a handful of the more popular peer to peer lending companies who haven’t rolled out their Innovative Finance ISA’s, but most companies now offer them.

I have received many reader emails asking where to invest and also expressing their frustrations and lack of understanding of how the Innovative Finance ISA allocations work, so here’s an explanation.

How Much Can Put Into An Innovative Finance ISA?

The kind British government gives a very generous annual tax-free ISA allowance of £20,000 for 2017/2018. For our American reader friends, the ISA is the UK equivalent of the USA IRA, however in the USA, one can only contribute a total of $5,500 per year into the two most used IRA’s, the Roth and the Standard.

How Many ISA’s Can I Have?

The total £20,000 current years ISA contribution can be split between the following ISA groups: cash ISA, stocks and shares ISA and the Innovative Finance ISA.  It doesn’t matter how you split the £20,000 contribution, as long as you don’t contribute to more than one companies ISA in each group, and contribute no more than £20,000 total for the 2017/2018 tax year

For example, you could split your 2017/2018’s allocation 50% into an Assetz Capital Innovative Finance ISA, 25% into a single cash ISA and 25% into a single stock and share ISA.

You are also allowed to move previous annual contributions wherever you wish. For example, you can take £5,000 from a 2011 ISA contribution split into multiple Innovative Finance ISA’s, cash ISA’s and stocks and share ISA’s or any other combinations.

Why the government doesn’t allow one to split current year ISA allocations into multiple different Innovative Finance ISA’s is a mystery, but that’s the government for you.

What is a Flexible ISA / Innovative Finance ISA?

This means you can withdraw money from your ISA / Innovative Finance ISA and replace it the same tax year without it affecting your annual allowance.

Which Innovative Finance ISA’s To Choose?

Firstly I would like to state, I don’t use Innovative Finance ISA’s, not because I don’t want to but because I spend too much time outside the UK and the HRMC (UK Treasury) doesn’t allow me to take advantage of ISA’s. If I were able to take advantage of the IFISA, I’d be happy to use the Innovative Finance ISA’s of any company I invest through using their standard accounts.

One important thing to note is that if you are looking to transfer your existing peer to leer loans into the ISA wrapper, the HRMC doesn’t allow this. You will need to liquidate all loans and investments and then reinvest the money in the Innovative Finance ISA account. So for example, if you hold a £1,000 investment in Assetz Capital’s Great British Business Account and want to use the Innovative Finance ISA wrapper, you would need to sell the £1,000 investment and reinvest under the Innovative Finance ISA wrapper. This detail affects lenders who have been invested for longer periods times and might hold loans with more favourable interest rates than are currently offered.

My Risk Opinion

For each company in this article, I briefly list how risky I consider each company to be. Risk is multi-layered including the financial sector, company and product or loans. Risk can also include other factors and is complex and opinion based. I assign each company a more targeted risk number in my in-depth peer to peer company reviews. You can also read a more detailed risk explanation here.

Here is a list of all the UK based peer to peer and crowdlending companies I personally use or have used along with their Innovative Finance ISA information. (Information is constantly changing so if you spot anything that’s incorrect, please contact me).

Ablrate

ISA Availability: ✓ (£100 min)
Transfer In: ✓ (£2,500 min)
Flexible: ✓
Innovative Finance ISA Fees: £100 transfer out
Estimated Annual Returns: Up to 16%
FSCS Protected: No
Ablrate Review
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Ablrate launched their Innovative Finance ISA in 2017 and it operates the same way their regular account operates with lenders manually selecting loans. Ablrate is good for investors looking for higher returns. If you have an existing account, you can open an ISA from your dashboard:

ablrate isa

I happily continue to invest in Ablrate which I consider to be in the higher risk category of peer to peer lending.

Assetz Capital

ISA Availability: ✓ (£1 min)
Transfer In: ✓
Flexible: ✓

Innovative Finance ISA Fees: None
Estimated Annual Returns: Up to 6.25%
FSCS Protected: No
Assetz Capital Review
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Assetz Capital launched their Innovative Finance ISA in late 2017. Once you open a regular account, you will see an Innovative Finance ISA link in your dashboard from which you can open an Innovative Finance ISA:

Assetz Capital IFISA

All auto-invest accounts except the Green Energy Account (currently closed) can be used under the Innovative Finance ISA wrapper. The self-select Manual Loan Account will be added in the first quarter of 2018 which I’m sure will please most investors. I’ve been a big Assetz Capital fan despite the fall in lender return rates and I would be happy to use their Innovative Finance ISA. Assetz Capital falls into my medium risk category of peer to peer lending.

Bondmason

ISA Availability: X
Transfer In: X
Flexible: X

Innovative Finance ISA Fees: N/A
Estimated Annual Returns: N/A
FSCS Protected: No
Bondmason Review
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I don’t expect a Bondmason Innovative Finance ISA anytime soon. Bondmason is unlike all other peer to peer lending companies so the Financial Conduct Authority (FCA) can’t figure out how to regulate them. Until Bondmason is fully FCA authorised by the FCA, they can’t offer an ISA. I exited Bondmason when they raised their investment minimum to £5,000 and their fees, but I still like the company and the team. I consider Bondmason to be in the medium risk category of peer to peer lending.

Collateral

ISA Availability: X
Transfer In: X
Flexible: X

Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 15%
FSCS Protected: No
Collateral Review

Collateral closed its doors and went into administration in March 2018 due to FCA compliance issues.

Funding Circle

ISA Availability: ✓ (£1,000 min)
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: None
Estimated Annual Returns: 4.8% – 7.2%
FSCS Protected: No
Funding Circle Review
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Funding Circle is currently rolling out its Innovative Finance ISA to current investors on an invite-only basis with a full release to come soon. If you already have a Funding Circle account, when you log into your dashboard you can see the ISA opening option in two places:

Funding Circle ISA

Funding Circle’s Innovative Finance ISA offerings are identical to their regular account offering with Balanced and Conservative options. The Balanced invests in higher risk loans while the Conservative account invests in lower risks loans. I am currently invested through Funding Circle and opt for the Balanced option. Funding Circle has been a long-standing staple of the peer to peer lending sector and I consider it to be in the mid-risk category of peer to peer lending.

Funding Secure

ISA Availability:✓ (£25 min)
Transfer In: 
Flexible: 
Innovative Finance ISA Fees: None
Estimated Annual Returns: Up to 15%
FSCS Protected: No
Funding Secure Review
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Funding Secure opened its Innovative Finance ISA in 2017; you do need a regular account to open and fund an Innovative Finance ISA. You can do this from within your investor dashboard:

funding secure isa

The Funding Secure Innovative Finance ISA operates identically to the regular account where lenders choose loans manually. I continue to remain invested in Funding Secure but am I carefully watching their default process as I have a defaulted loan that is approaching the 1,000 day mark. I consider Funding Secure to be in the high-risk category of peer to peer lending.

Growth Street

ISA Availability: X
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns:  Up to 5.3%
FSCS Protected: No
Growth Street Review
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Growth Street isn’t offering an Innovative Finance ISA at the moment and hasn’t indicated any plans to do so yet. My investment in Growth Street remains constant and as long as their rates stay above 5%, I’ll continue to remain invested as I like their 30-day account. I consider Growth Street to be in the medium risk range.

Landbay

ISA Availability: ✓ (£5,000 min)
Transfer In: 
Flexible: X
Innovative Finance ISA Fees: £0 transfer out, £50 transfer out, £50 repair fee if you fund more than your annual allowance
Estimated Annual Returns: 3.22% – 3.49%
FSCS Protected: No
Landbay Review
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Landbay launched its property-backed Innovative Finance ISA in February 2017. If you already have a regular account, you will see a link to open an Innovative Finance ISA in your dashboard:

Landbay IFISA

The Landbay Innovative Finance ISA operates identically to their regular accounts whereas lenders choose either the Fixed Rate or Tracker Rate product. Landbay requires no hands-on time other than to reinvest money returned from early loan repayment. (Automatic reinvestments on early repayments will be available soon). I’ve been happily investing through Landbay since 2015 and continue to do so. I consider Landbay to be a lower risk peer to peer lending investment product.

Lending Works

ISA Availability: ✓ (£10 min)
Transfer In: 
Flexible: X
Innovative Finance ISA Fees: None
Estimated Annual Returns: 4.5% – 6%
FSCS Protected: No
Lending Works Review
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Lending Works has been offering its popular Innovative Finance ISA since February 2017. If you already have a regular account, here’s how to open an ISA from your dashboard:lending works isa

The ISA operates exactly the same way as their normal auto-invest lending products, whereby you can select either the three-year or five-year terms. Lending Works makes sense as an ISA product for those who want competitive returns with a hands-off lending approach with automatic withdrawal or reinvestment. I really like Lending Works because it’s so easy to use. Select your terms, select your reinvestment option and keep an eye on the rates and that’s it! Lending Works falls into my lower risk category of peer to peer lending.

LendingCrowd

ISA Availability: ✓ (Growth and Income ISA £1,000 min, Self Select ISA £20 min)
Transfer In: 
Flexible: X
Min. Investment: 
Innovative Finance ISA Fees: Self Select ISA has 0.5% loan sale fee, Growth & Income ISA’s have 1% capital withdrawal fees
Estimated Annual Returns: Self Select ISA 6% – 15.95%, Growth ISA 6%, Income ISA 5.6%
FSCS Protected: No
LendingCrowd Review Coming Soon
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LendingCrowd isn’t a company I usually write about because my first foray into investing through them wasn’t particularly positive. However, a recent lengthy chat with CEO Stuart Lund gave me a clear understanding of their experienced credit and recovery team, where the company is headed, the culture behind the team and the learned mistakes. This has given me a new confidence and I will possibly be giving Lending Crowd another try. I think their Innovative Finance ISA offering is good because tax-free gains on their rates are very compelling. LendingCrowd’s ISA products are identical to their regular account products. The Growth and Income accounts are for those who are willing to take lower returns for the convenience of auto-investing, while the Self Select account offers higher rates for a hands-on loan selection experience. I consider LendingCrowd to be in the higher risk peer to peer lending category.

Lendinvest

ISA Availability: X
Transfer In: X
Flexible: X

Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 8.5%
FSCS Protected: No
Lendinvest Review
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Lendinvest doesn’t offer an Innovative Finance ISA and hasn’t indicated any plans to do so. I have a small investment within Lendinvest which I’m looking to increase due to the companies strong financial background and experienced credit team. I consider Lendinvest to be in the low to mid risk of peer to peer lending.

Lendy

ISA Availability: X
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 13%
FSCS Protected: No
Lendy Review
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Lendy currently doesn’t offer an Innovative Finance ISA but you can invest through a SIPP such as SIPCLUB. I expect Lendy to offer an ISA in early 2018 which would operate like their regular account. I am currently investing through Lendy using their regular account and consider it to be in the high-risk category of peer to peer lending.

Moneything

ISA Availability: X
Transfer In: X
Flexible: X

Innovative Finance ISA Fees: N/A

Estimated Annual Returns: Up to 13%
FSCS Protected: No
Moneything Review
View Moneything’s ISA Page

Moneything will be rolling out its Innovative Finance ISA sometime in 2018. Interested investors can visit Moneything’s ISA page for more information. I presume Moneything’s Innovative Finance ISA will operate identically to its regular account offering up to 13% per annum. I continue to remain invested through Moneything and I consider it to be in the high-risk category of peer to peer lending.

Octopus Choice

ISA Availability:✓ (£10 min)
Transfer In: 
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 4.1%
FSCS Protected: No
Review Coming Soon
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Octopus Choice launched its Innovative Finance ISA in 2017 and it operates the same way as their regular account works. All funds are auto-invested making Octopus Choice suitable for those who want a hands-off experience. I’ve kept my investment within Octopus Choice low and while the investment product seems stable, the interest returns aren’t particularly attractive to me. I consider Octopus Choice to be in the mid-risk category of peer to peer lending.

Property Moose

ISA Availability: X
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Dividend Returns Vary
FSCS Protected: No
Property Moose Review
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Like Property Partner, Property Moose currently doesn’t offer an Innovative Finance ISA. I’m currently withdrawing my Moose dividends as I don’t want my investment levels to increase. It still remains to be seen if my investments within Property Moose will pan out. I’m hoping for the best but have a feeling some of my property shares will be worth less than what I paid for them. Time will tell. I consider Property Moose to be in the medium to high-risk range.

Property Partner

ISA Availability:
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Dividend Returns Vary
FSCS Protected: No
Property Partner Review
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Property Partner currently doesn’t offer an Innovative Finance ISA but I will update this information if I hear of an upcoming ISA. I have been happy with Property Partner so far and I’m still reinvesting my Property partner dividends and have kept my existing investment amount. I consider Property Partner to be in the medium to high-risk range.

Ratesetter

ISA Availability: X
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: Unknown
Estimated Annual Returns: 3% – 5.8%
FSCS Protected: No
Ratesetter Review
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Ratesetter’s Innovative Finance ISA will launch in February 2018 utilising the Rolling, one-year and five-year products. The Innovative Finance ISA will be offered to existing active lenders’ who have loans as of December 2017. Investors will receive Innovative Finance ISA invite emails chronologically so those who have been investing the longest will receive the first invitations. Newer investors should see an invite by March 2018 (my guestimate).

I’ve been investing through Ratesetter since 2015 and am relatively happy but the rate fluctuations can be somewhat frustrating. I find I often have idle money sitting in my account as I wait for favourable rates. When this happens, I just move money to other companies offering better rates such as Lending Works. Ratesetter falls into my lower risk category of peer to peer investments.

You can sign up for Ratesetter’s Innovative Finance ISA launch notifications here.

Rebuilding Society

ISA Availability:✓ (£10 min)
Transfer In: ✓ (£1,000 min)
Flexible: 
Innovative Finance ISA Fees: £75 transfer in or out fee, 0.1% monthly fee
Estimated Annual Returns: Up to 18%
FSCS Protected: No
Rebuilding Society Review
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Rebuilding Society now has an Innovative Finance ISA which operates identically to its regular account. Lenders can use manual lending or the automatic Bidpal feature for a hands-off lending experience. I withdrew from Rebuilding Society in 2015 as I wasn’t completely happy with some of the loans offered. (Read my review for more details). I consider Rebuilding Society to be in the high-risk peer to peer lending category.

Unbolted

ISA Availability: X
Transfer In: X
Flexible: X

Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 10.5%
FSCS Protected: No
Unbolted Review
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I fully expect Unbolted to offer an Innovative Finance ISA but I’m not sure when. I like Unbolted as they offer a hands-off auto-invest option that pays really good return rates. Unbolted’s default recovery seems effective and I continue to invest. I consider them to be in the higher risk range of peer to peer lending.

Wellesley & Co.

ISA Availability: X
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Varies
FSCS Protected: No
Wellesley & Co. Review
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Wellesley & Co. is in a weird holding pattern at the moment. They suspended their peer to peer products indefinitely and now seem to be focusing on their Irish Stock Exchange listed Property Bond. You can hold this Bond in an ISA account. I’m not a fan of Wellesley’s products and ceased investing through them in 2016 as I now consider them to be in the medium to high-risk category of peer to peer lending.

Zopa

ISA Availability: ✓ (£1,000 min)
Transfer In: X
Flexible: X

Innovative Finance ISA Fees: 1% Loan sale Fee, possible market adjustment fee (see review)

Estimated Annual Returns:  Up to 4.6%
FSCS Protected: No
Zopa Review
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Peer to peer lending behemoth Zopa has now surpassed the £3bn lending mark and boasts over 75,000 lenders. It’s Innovative Finance ISA offering has been popular leading to Zopa limiting the offering when demand is too high. Zopa’s ISA operates the same as their standard account with lenders choosing between the Core and the Plus products. I’m currently letting my Zopa loans mature and withdrawing my funds as the rates are too low for my liking. I consider Zopa to be in the lower category of peer to peer lending.


Phew. Did you absorb all of that information?

Remember there are always implications of using the ISA / Innovative Finance ISA incorrectly (I speak from experience) so if you’re unsure, please consult your tax advisor.

The companies listed in this article often change their requirements, rates and offers. I update this information as I see changes. You can help me keep this information up to date so if you notice any errors or omissions, I invite you to contact me and let me know.

If you enjoyed this guide and want to learn more about peer to peer lending, click here and receive my complimentary Top 5 Peer to Peer Lending Sites Report.

Disclaimers: I’m not paid by the companies listed here to write this guide, nor am I employed by any of the companies I write about. In most cases, I have invested or continue to invest my own money in these companies. The sign-up links on this website are referral links. When you sign up for an account through my website, I receive a referral fee directly from the companies, at no cost to you. Your support enables me to continue to operate the Financial Thing website. You can read more about my referral links here.

This ISA / Innovative Finance ISA guide is for information purposes only and should not be considered investment advice and I encourage you to do your own research or ask me questions before you invest. Opinions expressed in this guide are my own. All information was deemed to be correct at the time of writing. Like any investment, peer to peer and crowdlending contains risks, so never invest more money than you can afford to lose.