P2P Sector Has Much To Do: IFISAs Still Unknown To 92% Of Public
As an industry, the peer-to-peer (P2P) lending sector hasn't done a great job of explaining and promoting itself. There's considerable confusion about what P2P loans are and that's not been helped by some mischief from sellers of mini-bonds (see this earlier article, which explains the difference). For the record, what we do is bring individuals looking for a good return on capital together with carefully vetted companies seeking funds for growth. Despite our careful risk analysis and protective measures such as taking a first charge on the assets of a borrowing company, capital loaned is at risk – for more detail on that risk, see the foot of this page, our Home page and FAQ section.
ONLY eight per cent of UK adults have heard of the Innovative Finance ISA (IFISA), according to research from peer-to-peer property lender Relendex. This leaves 45.9 million people unaware of the tax wrapper around debt-based securities including P2P loans, which was added to the ISA stable in 2016. Men were more likely to have heard of the IFISA than women, at 10 per cent versus six per cent, the survey of 2,000 adults revealed.
A Process Guide To Innovative Finance ISA Investment
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.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:
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 £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.