Happy New (Tax) Year! Transfer Window For 7% ISA Yield Still Open
The new tax year has begun, and we are delighted to say we've attracted many new lenders, and facilitated a large volume of credit for our borrowers.
But the Individual Savings Account (ISA) season is not over. Investors can transfer their Stocks and Shares or Cash ISAs to an Innovative Finance ISA. Money&Co.'s ISA has a target yield, net of our charges, of over 7 per cent, free of tax. That said, investors and savers need to understand that lending does carry risk. We take a legal charge on the assets of the borrower, make sure there's no other debt, and that the borrower companies have the wherewithal (for a start, a compelling track record of profit) to service the debt.
Please read our extensive explanations and admonitions on the Home page, below, in FAQs and elsewhere on site.
Here's an excerpt from a recent ISA summary article from the Telegraph.
Neil Faulkner, of 4thWay, a peer-to-peer analyst, said: "Innovative Finance Isas are an investment and must not be misunderstood for typical savings accounts. As with all investments, by far the most essential step to reducing risks is to spread money around."He warned investors not to lend without properly understanding the platform's business model.Figures from the Peer-to-Peer Finance Association show more than £8bn had been raised via the sector up to the end of last year.
We currently have three loan offerings live on the site. They are rated A+ or A – the two best risk ratings – and have a fixed return of 8 per cent or an indicative return (suggested bid rate in the auction) of the same amount. A gross yield of 8 per cent equates to a return of 7 per cent net of our fees. If you invest via our Innovative Finance Individual Savings Account (ISA – see below for a step-by-step guide to how this works) you will receive the income tax-free.
All loans on site are eligible for inclusion in a Money&Co. ISA. If you do not have a Money&Co. ISA yet, please click on the ISA application tab on the Home page and fill in the form. You will need your National Insurance number. The ISA allowance for 2017/18 is £20,000 and you must commit funds by midnight on 5 April or you will lose your ISA allowance for this year. For full detail on the process, see below.
A Process Guide To Innovative Finance ISA Investment
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:
Step 1 Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2 Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3 Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you?ve bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
The ISA allowance for 2018/19 is unchanged from last tax year at ú20,000, 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 ú8,400 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 an earlier article on security, access and yield.
It's relatively easy to logon to our site and register to become a lender. But if that's all too new-fangled, you can call us on 020 3143 4004 or write to Money&Co., 58 Glentham Road, London SW13 9JJ. We'll then send you an ISA Brochure, and ISA Transfer Authority form (if you want to transfer monies from a Cash ISA) and a Freepost envelope. Then it's just a question of following your nose to get that income...