Wednesday midnight represents an important deadline for individuals looking to get a good, tax-efficient return on their money. But the problem with deadlines is that they often push people into making poor decisions. Football clubs have two transfer windows each year and there must be many board directors and managers who regret having made hasty decisions just before the transfer window closed. However, making use of the tax benefits offered by Individual Savings Accounts (ISAs) is surely an open goal too good to miss.
For the financial services industry, the first quarter of the year is dominated by ISA business and individuals must use their annual allowance by midnight on 5 April or they lose it forever. The allowance for 2016/17 is £15,240 and the introduction of the Innovative Finance ISA, which now sits alongside the Cash ISA and the Stocks and Shares ISA, means that there are now three options to choose from. You can only have one of each type of ISA or you can use your whole allowance to buy one type of ISA. So, you could decide to invest £15,240 in the Money&Co. Innovative Finance ISA (also known as an IFISA). We have a number of three-year loans available on the site at the moment with a fixed-interest rate of 8 per cent. We take a fee of 1 per cent per annum, leaving a net yield of 7 per cent. If you invest the whole of your ISA allowance, then you will earn £3,200 of interest over the next three years – completely tax-free.
In an environment where it is very difficult to mitigate tax and where pension limits have been significantly reduced, it is very important that you remember to use your annual ISA allowance. Those who have done so since PEPs were introduced now have sizeable sums in a tax-free environment. The allowance for 2017/18 is increasing to £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.
As with any investment, there are risks involved. We always take security for our loans, but it is still possible to lose money. Some of our loans carry more risk than others and we give them ratings of A+, A, B+, B and C+ to reflect how risky we believe that an individual loan is. The new loans that are currently on the site are rated A+ or A reflecting the quality of the security that has been given by the borrowers.
Don’t forget to use your ISA allowance. A tax-free yield of 7 per cent per annum net of fees is simply too good to pass up!
P2P Loans, IFISAs & Risk
If you haven’t made a loan via Money&Co. before, please read the risk warnings and the FAQ section. You may also wish to consult a financial adviser before making an investment.