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User Question About Switching IFISAs When Lending Is Too Slow
If you find lending is too slow in one of your IFISAs, and the cash in that IFISA is all from prior tax years, you can simply transfer any unlent cash to another IFISA. That's provided your IFISA provider allows you to make partial transfers*. As more of your money is repaid by your borrowers, you can transfer that out, too.
Contrary to popular opinion, you're allowed to open more than one new IFISA in order to do that. And that's even if you have already opened another IFISA in the current tax year. More on how 4thWay was first to prove that, and how it helps you spread your money across more IFISAs, more quickly, in How To Lend Across Multiple IFISAs In One Year!
So it's relatively simple to switch when you have money from prior tax years in an IFISA – even if it is a little irritating that you can't move money that is currently on loan right away, when you're unable to sell those loans early.
How easy is it to move new IFISA money to another IFISA?
However, a 4thWay user just asked us about removing new money, i.e. money you put in during the current tax year, but already regret doing so. This is not the same.
At the beginning of this tax year I set up a new ISA with CrowdProperty. This has not been a success. So far less than 1/2 of my money has been invested, much of it being in very small amounts @£50 – £200.
Do the current ISA rules allow me to transfer the uninvested funds into an existing ISA with another supplier.
If you want to transfer out in the same tax year, you have to transfer the whole lot, including the invested funds unfortunately. You can't partially transfer out in the first year. Rather, you can, but any money that you leave on loan in the CrowdProperty ISA now becomes taxable and no longer protected, as usual, due to its ISA status.
As I'm sure you know, CrowdProperty doesn't have a feature to enable you to sell your loans early, so you can't quickly uninvest and transfer out.
The best I can suggest is the following. CrowdProperty told us previously that its ISA is flexible*. This means you can:
Step 1: Withdraw some of your uninvested cash and at least do something with it, such as put it in a savings account.
Step 2: Drip it back into CrowdProperty as your remaining funds in its IFISA get invested, until the end of this tax year. It has to be put back into the CrowdProperty ISA before the end of this tax year – before 6th April – or you'll lose that portion of your ISA allowance for this tax year forever.
(Losing a portion of your ISA allowance for a year is only really likely to be an issue if you expect to routinely put in your full ISA allowance every year. Most people don't come close to using their entire allowance, in which case it's not a big deal.)
Step 3: From the start of the next tax year, you'll now be allowed to do partial transfers out of CrowdProperty as your borrowers repay you. CrowdProperty confirmed to us that it allows partial transfers out, but you need to check with your other ISA if it'll accept partial transfers in. (Most do.*)
You could withdraw any uninvested cash in your CrowdProperty ISA now and put it into a completely different kind of flexible ISA, such as a stocks and shares ISA or a cash ISA. Thus, you don't lose any of this year's ISA allowance and continue to do something with the cash that isn't currently being lent.
Reducing the chance this happens again
Open lots of other IFISAs now – you can leave them as empty shells for now, even if you're not allowed to put new money in them yet.
In future tax years, invest new cash in one of your shell IFISAs that allows early exit. If you struggle to lend much money through it, you'll have an excellent chance of being able to sell all your loans, so that you can move your entire pot of new IFISA funds to another IFISA almost instantly.
The following tax year, you can redistribute the existing funds in that IFISA to as many IFISAs as you want.
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Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
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*4thWay makes it easy for you to see if an IFISA allows partial transfers out or in, or whether it’s a flexible ISA. Just go to our comparison tables, find an IFISA account you’re interested in, and click on the “i” button next to “Description | IFISA”.