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Innovative Finance ISA

The Innovative Finance ISA (IFISA) was launched in April 2016, allowing peer-to-peer investments (P2P) to be held within a tax-efficient ISA wrapper. To offer the Innovate Finance ISA, P2P providers must be fully authorised by the the FCA and approved by the HMRC as ISA plan managers. You will be able to track who is offering the innovative finance ISA and what regulatory stage P2P providers are at by viewing the Orca innovative finance ISA tracker tables below.

Frequently Asked Questions

Introduced April 6th 2016, the Innovative Finance ISA (IFISA) is a tax-efficient ISA wrapper which allows peer-to-peer investments to be held in an Individual Savings Account (ISA). This means investors are not required to pay tax on the income generated from their investments.

Open an IFISA online with one of the eligible P2P providers (also ISA plan manager) and then select the P2P investments you want to invest in.

The ISA subscription limit for tax year 2017-18 is £20k. This can be subscribed entirely or proportionally to an IFISA, with the remaining allowance held in the other ISA types, typically Cash and Stocks & Shares. You cannot subscribe more than the annual allowance in a given tax year.

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Innovative Finance ISA Features

  • ISA allowance of £20k applies
  • Uncorrelated, risk-adjusted returns
  • Tax-free interest
How it Works

Innovative Finance ISA Available (P2P Providers)

Platform Interest Rate(%) Amount Lent(£) Investment
Crowdstacker 5.43% - 7% £17.37 million P2P Business Open an Account
Lending Works 3.3% - 6% £70.27 million P2P Consumer Open an Account
Landbay 3.03% - 4.5% £55.27 million P2P Property Open an Account
Zopa 2.9% - 6.7% £2.63 billion P2P Consumer Open an Account
Crowd2Fund 8.7% £10 Million P2P Business Open an Account
LandlordInvest 5% - 12% £1 Million P2P Property Open an Account
LendingCrowd 6% £18.28 million P2P Business Open an Account
Money&Co 6-10% £7.73 million P2P Business Open an Account
Relendex 8.5% - 10% £12.58 million P2P Property Open an Account
Proplend 6.28% - 11.05% £23.83 million P2P Property Open an Account
Octopus Choice 4% - 4.3% £140.43 million P2P Property Open an Account
Folk2Folk 5.5% - 6.5% £172.08 million P2P Business Open an Account
Funding Secure 10% - 15% £162.14 million P2P Consumer, Property, Pawn Open an Account
HNW Lending 6% - 15% - P2P Consumer, Business, Pawn Open an Account
Kuflink 3.99% - 5.35% - P2P Property Open an Account
Simple Backing 6% - 18% - P2P Property Open an Account
Ablrate 10%-16% £26.86 million P2P Business Open an Account

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IFISA Avaliable (Bonds & Debentures)

Platform Interest Rate(%) Amount Lent(£) Investment
Goji Investments 5% - Crowd Bond (Diversified Lending) Open an Account
Downing Crowd 4% - 7% £29.91 million Crowd Bond (Business) Open an Account
UK Bond Network 11% £12.28 million Bond (Business) Open an Account
Abundance Generation 4% - 12% £53.69 million Debenture (Energy Projects) Open an Account
Property Crowd 10% - 12% - Crowd Bond (Property) Open an Account
Advancr (Triple Point) 5.1% - 6.2% - Crowd Bond (Business) Open an Account
Crowd For Angels 12% - Crowd Bond (Business) Open an Account
Basset Gold 6% - Bond (Diversified Lending) Open an Account
CapitalRise 10% - 14% - Property Open an Account
Mongoose Crowd 4.5% - 5% - Crowd Bond (Energy) Open an Account

Full FCA Authorisation

Platform Interest Rate(%) Amount Lent(£) Loan Type
Assetz Capital 3.75% - 7% £323.63 million P2P Business and Property Open an Account
CapitalStackers 5% - 15% - P2P Property Open an Account
Rebuilding Society 14% - 18.1% £11.7 million P2P Business Open an Account
Funding Circle 6.7% - 7.5% £2.7 billion P2P Business Open an Account
ArchOver 7.23% - 9% £46.6 million P2P Business Open an Account
RateSetter 1.7% - 5.9% £2.1 billion P2P Business, Consumer, Property Open an Account
Linked Finance 8.5% - 15% - P2P Business Open an Account
Unbolted 8% - 10.5% - P2P Pawn Open an Account
Funding Knight 8.96% £31.48 million Business Open an Account
ThinCats 9% - 11.24% £247.8 million P2P Business Open an Account
Flender 8% - 11% - P2P Business Open an Account

FCA Interim Permissions

Platform Interest Rate(%) Amount Lent(£) Loan Type
Lendy 12% £333.69 million P2P Property Open an Account
Collateral 14% - P2P Property Open an Account

Innovative Finance ISA: How it Works

By holding your peer-to-peer investments (P2P) in an Innovative Finance ISA (IFISA) you can earn competitive interest rates and shield any returns from tax. Providing the P2P provider meets the necessary regulatory requirements you will be able to Open an Account, invest in P2P investments and earn tax-free returns.

Steps to investing
  1. Research the P2P providers offering the Innovative Finance ISA
  2. Select the IFISA provider and open an account
  3. Choose the P2P product you wish to invest in. These will be held within your Innovative Finance ISA
  4. Start earning interest, tax-free
Warning

Peer-to-peer lending is not covered by the FSCS. Your capital is at risk.

General ISA Rules

Annual allowance tax-year 2017-18

£20k subscription limit


Allowance spread

ISA allocation is flexible, e.g: £10,000 IFISA, £5k Cash, £5k Stocks & Shares


One ISA of each type per year

You cannot subscribe your annual ISA allowance to more than one of the same ISA type in the tax year


Transfers

You can transfer any amount of “old ISA money” to an ISA of the same or diferent type, e.g: £25,000 old Cash ISA subscriptions to a new IFISA

Transfers and Withdrawals

ISA Guidelines state that an investor can transfer current and past years’ ISA subscriptions to a new ISA, including an Innovative Finance ISA:

  • You can transfer all of the current year’s ISA subscriptions to a new IFISA
  • You can transfer unlimited old tax-year ISA subscriptions, from any ISA type, to an IFISA
  • You can transfer old ISA money to multiple IFISAs in the tax-year (ISA plan manager holds discretion over this)
Warning

You cannot subscribe your annual tax-year ISA allowance to more than one IFISA.

It is between you and the P2P provider how withdrawals take place as some providers can facilitate early access through selling your investment to other investors, whiles others cannot.

Peer-to-Peer Lending

Industry Established

2005


Cumulative Total Lent

£10 billion


Total Lent 2016

£3.1 billion


No. of UK P2P Investors

177,000 (estimate)

Peer-to-Peer Lending

Peer-to-peer lending is a relatively new asset class, invented in 2005. The industry became regulated in 2014, but most providers have been, and still are, operating under interim FCA regulatory permissions.

To be able to offer an IFISA a provider (including 3rd party provider) must have the following:

  1. Full FCA authorisation
  2. HMRC ISA plan manager approval

ISA plan managers (approved by the HMRC) can offer the Innovative Finance ISA to customers. At present, there is a long list of peer-to-peer lending providers going through the regulatory approval process so that they qualify to offer Innovative Finance ISAs.

Once qualified, investors in the P2P provider can hold their P2P investments in the IFISA wrapper, earning income, free from tax.

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Frequently Asked Questions

Introduced April 6th 2016, the Innovative Finance ISA (IFISA) is a tax-efficient ISA wrapper which allows peer-to-peer investments to be held in an Individual Savings Account (ISA). This means investors are not required to pay tax on the income generated from their investments.

Open an IFISA online with one of the eligible P2P providers (also ISA plan manager) and then select the P2P investments you want to invest in.

The ISA subscription limit for tax year 2017-18 is £20k. This can be subscribed entirely or proportionally to an IFISA, with the remaining allowance held in the other ISA types, typically Cash and Stocks & Shares. You cannot subscribe more than the annual allowance in a given tax year.

There are three main ISA types: Cash, Stocks and Shares and Innovative Finance ISA. You can spread your annual tax year allowance of £20k (2017-2018 allowance) between these ISAs however you wish..

Fully FCA authorised and HMRC ISA plan manager approved providers can offer IFISAs. Most peer-to-peer lending providers operate under interim permissions, meaning they must be granted full authorisation and be approved as an ISA plan manager before they can offer Innovative Finance ISAs. Review the Orca IFISA tracker tables for clarification on a P2P provider’s status.

To be eligible to invest in an IFISA you must: - be aged 18 or over; - be resident in the United Kingdom, or if not a resident be performing duties as a Crown employee serving overseas and paid by public revenue of the United Kingdom (typically a serving member of the armed forces, or a diplomat), or be married to, or in a civil partnership with, such a person; - not have exceeded the overall subscription limit which is £20k for 2017/18. You will need your bank account details and National Insurance number to activate your IFISA, before depositing funds and investing in the peer-to-peer investment(s) of your choice via the P2P lending provider; - not have subscribed to another ISA of the same type in that tax year, otherwise than by way of additional permitted subscriptions, flexible ISA replacement subscriptions, defaulted cash account subscriptions to a cash ISA, and Help to Buy ISA reinstatement subscriptions.

ISA Guidelines stipulate that you may only subscribe annual allowance subscriptions to one Innovative Finance ISA per tax year. This means some, or all, of your annual allowance of £20k (2017/ 2018) can be subscribed to only one IFISA within the 2017/ 2018 tax year. The same rule applies to a Cash ISA and a Stocks and Shares ISA.

You can transfer current tax year ISA subscriptions from any ISA type to an Innovative Finance ISA. These subscriptions must be within the tax year allowance of £20k. If you are transferring out of a current IFISA, you will need to liquidate your P2P investment in order to withdraw and transfer. You can transfer unlimited ISA subscriptions from any previous years’ ISAs. Again, any ISA type qualifies.

You will only be able to transfer from your IFISA providing you can liquidate your P2P investments into cash. Some P2P providers can facilitate the sale of your P2P investment to another investor, however some P2P providers do not offer this service. This process will be determined between you and the P2P provider acting as your ISA plan manager.

Peer-to-peer lending is not considered a liquid asset class. Some P2P providers offer early access features where you can liquidate your assets by selling your investment to other investors. Liquidating your investment to cash is important so you can withdraw from your IFISA or to transfer subscriptions to a new IFISA. This process will be determined between you and the P2P providers acting as your ISA plan manager (unless a 3rd party provider is your plan manager, where you are still required to coordinate the sale of the investment).

Peer-to-peer lending became regulated by the UK Financial Conduct Authority (FCA) in 2014. Most major platforms operate under interim-permissions, but the FCA is currently in the process of fully authorising P2P providers.

No. Peer-to-peer lending is not covered by the FSCS. P2P providers employ strict security measures, so should a borrower default on their loan, the P2P provider will attempt to recover your capital (and interest if possible). There are no guarantees, however. Your capital is at risk.