PEER-TO-PEER LENDING is already well known for helping investors beat paltry savings rates and now it even has its own tax wrapper in the form of the Innovative Finance ISA (IFISA).Most people understand how cash and stocks and shares ISAs work but as the IFISA is relatively new there is still some confusion over how the product works and how to attract customers.So how does the IFISA work in practice and what do platforms and investors have to look out for?Like other types of ISAs, the IFISA allows individuals to earn up to £20,000 tax free.Most P2P lenders offer IFISAs alongside their mainstream product range but there are also providers such as Goji, and soon Orca, which let investors back loans from a range of platforms within one tax wrapper.The IFISA is one the P2P sector's biggest marketing tools as it can leverage mainstream awareness of the ISA family to highlight the inflation-beating returns on offer, now with the added benefit of tax-free earnings."The IFISA market is changing, potentially giving investors a great deal of flexibility," says Ansar Mahmood, founder of IFISA provider Fluid Bond."Two of the most common factors for investors choosing a new product are return on investment, and the confidence they have in the underlying investment and IFISA provider."Jonathan Segal, head of fintech at law firm Fox Williams, says due diligence is important to understand what the underlying asset is and the team behind it.
Money&Co. has facilitated just under £15 million in P2P loans since 2014. As we write, the latest loan offering is set to follow shortly.
A Process Guide To Innovative Finance ISA InvestmentMoney&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.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:
Risk: Security, Access, YieldDo 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.