It is almost the end of the tax year and, as the proverb on the sun dial says, “It is later than you think.” Our friends at P2P Finance News offer a timely (sic) reminder for savers and investors.
WITH less than two months left to the end of the tax year, make sure you don’t forget to use your tax-free ISA allowance.
Savers can allocate all or some of this tax year’s £20,000 to an Innovative Finance ISA (IFISA), which allows investors to enjoy tax-free earnings on peer-to-peer investments.
If you have already used up your ISA allowance, it is possible to transfer an existing ISA (be it cash, stocks and shares or IFISA) into a new IFISA.
Average 8 % yield
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). That figure is the result of almost £15 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
A Process Guide To Innovative Finance ISA Investment
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2018/19 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.