As we’ve said before, times are tough for income-hungry investors. Interest rates remain low, and traditional savings products mostly lag inflation. So the hunt for income is always on, as noted by our friends at P2P Finance News.
ISA SEASON may be a distant memory but there are still tax-wrapper product launches to look forward to in the coming weeks.
At least three peer-to-peer lenders are set to launch Innovative Finance ISAs (IFISA) in the near future, giving investors a wider choice of products and the opportunity to get their tax-free returns in early…
Money&Co is introducing a managed portfolio product that it says will offer extra security to investors by ensuring more diversification.
The P2P business lender is planning to discontinue single-loan offerings in favour of an IFISA-eligible “portfolio approach”.
A Process Guide To Innovative Finance ISA Investment
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.
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 2019/20 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.