Innovative Finance ISA Guide – Where and How To Invest

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Innovative Finance ISA

The Innovative Finance ISA Guide

The peer to peer Innovative Finance ISA (IFISA) is here and available for investors to use. Well mostly anyway. 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 2019/2020. 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 $6,000 (ages 50 and under) and $6,500 (ages 50+) 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 company ISA in each group, and contribute no more than £20,000 total for the 2019/2020 tax year

For example, you could split your 2018/2019 allocation 50% into an Assetz Capital Innovative Finance ISA, 25% into a single cash ISA and 25% into a stocks and shares ISA.

You can transfer previous years ISA allocations into an IFISA but you can only open one of each IFISA account yearly. For example in 2019, you can take £20,000 from previous years ISA contributions and transfer the £20,000 into a new IFISA account, plus add the £20,000 2019 contribution also. Just be sure not to open more than one IFISA account per tax year.

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 Innovative Finance ISA’s.

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 would 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

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

IFISA 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 hold a small investment in Ablrate.

Assetz Capital

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

Innovative Finance ISA Fees: None
Estimated Annual Returns: Up to 11.5%
FSCS Protected: No
Assetz Capital Review
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Assetz Capital launched its 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 Isa

All auto-invest and manual lending accounts can be used under the Innovative Finance ISA wrapper.

CrowdProperty

IFISA Availability:
Transfer In:
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 8%
FSCS Protected: No
CrowdProperty Tutorial Video
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Corwdproperty’s IFISA allows you to manually invest in property loans or use their popular autoinvest tool which automatically diversifies you across new loans as they are released.

Funding Circle

IFISA Availability: X
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: None
Estimated Annual Returns: 4.3% – 6.5%
FSCS Protected: No
Funding Circle Review
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Funding Circle used to offer an Innovative Finance ISA however it no longer offers accounts to new investors since it is focusing on government-backed CBILS lending which peer to peer lenders cannot invest in. If you have an account, you can see the ISA option on the drop-down menu but you won’t be available to open an ISA.

Funding Circle ISA

Growth Street

IFISA Availability: X
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns:  N/A
FSCS Protected: No
Growth Street Review

Growth Street is winding down its loan book and no longers offer new investments.

Kuflink

IFISA Availability: ✓ (£100 min)
Transfer In: 
Flexible:
Innovative Finance ISA Fees: £35 transfer out fee
Estimated Annual Returns: Up to 7%
FSCS Protected: No
Kuflink Review
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Kuflink offers an ISA but pays interest once per year. You can only invest in loan portfolios which don’t allow you to self-select your own loans.

Loanpad

IFISA Availability: ✓ (£10 min)
Transfer In: 
Flexible:
Innovative Finance ISA Fees: 0.5% early withdraw fee
Estimated Annual Returns: Up to 4%
FSCS Protected: No
Loanpad Review
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Loanpad is one of the lower risk, lower reward peer to peer lending companies. Opening an ISA is easy, especially if you already have a regular account:

Loanpad ISA

Lending Works

IFISA Availability: ✓ (£10 min)
Transfer In: 
Flexible: X
Innovative Finance ISA Fees: None
Estimated Annual Returns: Up to 4.8%
FSCS Protected: No
Lending Works Review
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Lending Works has been offering its popular Innovative Finance ISA since February 2017. Due to Covid-19, Lending Works has a freeze on new investment accounts. This freeze may be lifted before the end of 2020. You can register for a notification  If you already have a regular account, here’s how to open an ISA from your dashboard:

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.

LendingCrowd

IFISA Availability: ✓ (Growth and Income ISA £1,000 min, Self Select ISA £20 min)
Transfer In: 
Flexible:
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 5.95% – 14.25%, Growth ISA 4.6%, Income ISA 4.2%
FSCS Protected: No
LendingCrowd ISA Info
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LendingCrowd is one of the companies offering government back CBILS during the Covid-19 pandemic. Peer to peer lenders cannot invest in CBILS loans. If you want to invest through Lending Crowd, you will only be able to purchase existing loans from the secondary market and availability will vary. Investors may be able to buy new loans in future but for now, the secondary market is your only option.

Lendinvest

IFISA Availability: X
Transfer In: X
Flexible: X

Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Self-Select up to 7%, Secured bonds up to 5.375%

FSCS Protected: No
Lendinvest Review
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Lendinvest’s regular investments cannot be included in an Innovative Finance ISA because they are structured as Alternative Investment Funds. Lendinvest’s listed bonds can be included in a stock and shares ISA.

Moneything

IFISA Availability: X
Transfer In: X
Flexible:X
FSCS Protected: No
Moneything Review
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View Moneything’s ISA Page

Moneything is voluntarily winding down its loan book and no longer offers new investor accounts.

Octopus Choice

IFISA Availability: X (Previously £10 min)
Transfer In: X
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 4.7%
FSCS Protected: No
Octopus Choice review
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Octopus Choice launched its Innovative Finance ISA in 2017 and it operates the same way as their regular account works. Due to Covid-19, Octopus Choice has paused all new investments and is unsure when this pause will be retracted.

Property Partner

IFISA Availability:
Transfer In:
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 offers an Innovative Finance ISA. Investments are self-selected.

Ratesetter

IFISA Availability: ✓  (£10 min)
Transfer In:
Flexible:
Innovative Finance ISA Fees: None
Estimated Annual Returns: Up to 4%
FSCS Protected: No
Ratesetter Review
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Ratesetter’s Innovative Finance ISA was launched in February 2018 utilising the Rolling, one-year and five-year products. Ratesetter has cut its lending return rates due to t Covid-19, therefore, I’ve reduced my investments.

Rebuilding Society

IFISA 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: 6.9%
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.

Unbolted

IFISA Availability:
Transfer In: 
Flexible: X
Innovative Finance ISA Fees: N/A
Estimated Annual Returns: Up to 12%
FSCS Protected: No
Unbolted Review
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Unbolted offers an Innovative Finance ISA in which you can hold the same investments as can be held ina regular taxable account.

Wellesley & Co.

IFISA Availability: X
Transfer In: X
Flexible: X

FSCS Protected: No
Wellesley & Co. Review
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In September Wellesley & Co. announced it will cease retail investments.

Zopa

IFISA Availability: ✓ (£1,000 min)
Transfer In:
Flexible: X
Innovative Finance ISA Fees: 1% Loan sale Fee, possible market adjustment fee (see review)

Estimated Annual Returns: Up to 5.3%
FSCS Protected: No
Zopa Review
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Peer to peer lending behemoth Zopa has now surpassed the £5bn lending mark. Its Innovative Finance ISA offering has been popular due to Zopa being the UK’s oldest peer to peer lender. Zopa’s ISA operates the same as their standard account with lenders choosing between the Core and the Plus products.


Phew. Did you absorb all of that information?

Remember there are always implications of using the ISA / Innovative Finance ISA incorrectly 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.

** This IFISA page is for information purposes only. This information is not financial advice and has been prepared without taking your objectives, financial situation or needs into account. You should consider its appropriateness for your circumstances. All investing carries risks. Opinions expressed in this review are opinions based on my own personal experiences. The FSCS does not cover investments and your capital is at risk. Please don’t invest more than you can afford to lose. **

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