The IFISA (P2P ISA) Guide

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This page was last updated on 6 June, 2017

IFISAs in five bullet points

  • IFISAs offer tax-free lending on contributions of up to £20,000 per tax year (which always starts on 6th April), but most people can lend tax free outside an IFISA anyway.
  • Just one IFISA is allowed to contain new amounts contributed that tax year. This could be an existing IFISA you opened previously or a new one opened for the tax year.
  • You can transfer into your IFISA as much money as you want from other ISAs, including cash and share ISAs or other IFISAs, and you can also transfer out the other way.
  • To initiate transfers, don't withdraw your cash or you could lose your IFISA allowance! Instead, you complete a form with the IFISA provider you are transferring to, and it will initiate the transfer on your behalf.
  • There are no extra charges for IFISAs compared to doing P2P lending outside of an IFISA.

 

To help choose your IFISA, read The Best IFISAs Available Now.

Current list of available IFISAs

Here's a complete list of all the P2P lending sites that already offer Innovative Finance Individual Savings Accounts. (Now you know why we just call them IFISAs.)

Have full FCA authorisationIFISA linkIn 4thWay comparison table with a Quick Expert Review**
AbundanceHereNo
Basset & GoldHereNo
CapitalRiseHereNo
Crowd2Fund*HereYes
Crowd for Angels HereNo
CrowdstackerHereNo
FundingSecureHereYes
HNW Lending* (see table footnote)Here (sign up and contact HNW Lending to open it)Yes
LandlordInvestHereNo
Landbay*Here – min £5,000Yes
LendingCrowd*HereYes
Lending Works*Here (log in to your account to open it)Yes
Money&Co.HereYes
Property CrowdHereNo
Proplend*Currently available to existing account holders onlyYes
Relendex*HereYes
UK Bond NetworkHereYes
ZopaHere (log in to your account to open it)Yes

Note that secured lending P2P site HNW Lending requires you lend at least £10,000 per individual loan, so it is for wealthy people only. If you put £15,000 into your IFISA, you may lend as little as £5,000 per loan. Read about HNW Lending here.

IFISAs coming soon

Here's a list of all the noteworthy P2P lending sites that have received full authorisation from the Financial Conduct Authority – which is required before they can offer IFISAs.

There are others with FCA authorisation but they are not established – they either aren't ready to open your account or don't even have a website yet.

Have full FCA authorisationIFISA expectedIn 4thWay comparison table**
AblrateWas expected end of May*** (delayed)No
ArchOverNo detailsYes
CapitalStackersNo detailsYes
eMoneyUnionNo detailsNo
Funding CircleNo detailsYes
Folk2FolkWas expected (delayed)No
KuflinkJune***No
Octopus ChoiceComing this yearNo
MoneyThingMonths away (as of 24 March 2017)***Yes
Rebuildingsociety*Said “shortly” (now delayed)Yes

Most other P2P lending sites are also working through the long, arduous process of getting full authorisation. In addition to getting FCA authorisation, the platforms then need to apply for ISA manager status with HM Revenue & Customs – the taxman. That step is a simple one though and not much of a barrier.

The main benefit of lending through an IFISA

The biggest benefit of a P2P ISA – a so-called “Innovative Finance ISA” or “IFISA” – is that the lending interest you earn is tax free. It remains tax free regardless of how much your pot of money grows over the years.

Bear in mind that, outside of an IFISA, most people won't pay tax anyway. Basic ratepayers have a £1,000 annual allowance on interest they earn through peer-to-peer lending and savings accounts combined, and even higher-rate payers have a £500 allowance.

This is particularly useful since you're only allowed to open one IFISA per year, but it is sensible to spread your money across several P2P sites early on. You can read more about your personal allowances in our tax guide: How Is Peer-to-Peer Lending Taxed?

Other benefits of IFISAs

IFISAs P2P ISA and capital gains taxalso enable you to avoid being taxed on any “capital gains” you make.

Capital gains taxes aren't so common in peer-to-peer, but they can happen. (See sidebox, right.)

Another benefit of IFISAs is that you're saved from having to report your peer-to-peer earnings to the taxman. You don't have to declare it anywhere.

You don’t need to declare any ISA interest, income or capital gains to HM Revenue & Customs. When lending outside of an IFISA, you may have to do so.

ISA limits and paying into IFISAs

Every adult can put in up to £20,000 in an IFISA this tax year (that's from 6 April 2017 to 5 April 2018).

The annual allowance is shared between all your ISAs, so if you also contribute to a cash ISA and a stocks and shares ISA, you have to decide how you'll split this year's ISA limit.

It doesn't matter how much this money grows after that, even if it grows to £100,000 or more. The total amount you can earn is uncapped and untaxed, and you may keep your IFISAs for life, if you want.

Rather than opening a second IFISA in the following tax year, P2P lending sites are allowed to let you add new money to the same IFISA instead, if that is what you want.

You can also transfer in or out cash from cash ISAs or stocks and shares ISAs, but more on that later.

You may continue to open and hold as many normal (non-IFISA) P2P lending accounts as you want.

Moving from regular P2P lending accounts to IFISAs

You have to sell your existing P2P loans, changing them into cash, before you then pay the cash into the IFISA. So you can't just transfer your existing P2P loans into an IFISA.

Transferring money between ISAs of all types

You can transfer between IFISAs. You can also transfer from or to cash ISAs, or from or to stocks and shares ISAs. You can transfer between ISAs as often as you like.

To transfer between any ISAs, don't withdraw your money first or you could lose your allowance (although read about “flexible ISAs” below). Instead, complete a transfer form provided by the IFISA provider you want to move to.

Transfers between ISAs of existing funds that you contributed in previous tax years  do not affect your ISA allowance for the year. You can transfer as much as you want with no legal limit, although some P2P lending sites might choose to set their own limits.

What I mean is, if you have put in £20,000 a year for several years into one or more IFISAs, and you have earned a lot of interest on your loans, you could end up transferring hundreds of thousands of pounds from one IFISA to another. This is fine. The annual limit only applies to new money going into the IFISA in that tax year.

You have to do transfers in cash, so you have to sell any investments or loans before transferring, or you have to wait for loans to be repaid first.

When transferring, you can move all or part of your money from previous years. However, if transferring away from any ISA that contains some of your current year's allowance, you must transfer the whole amount.

When transferring from other ISAs, the ISA provider you are leaving might charge you for transferring out.

IFISA transfers are supposed to be completed within 30 days. If it takes longer and you are not happy with the explanation, you can complain to the Financial Ombudsman Service, which has the power to force the transferring company to compensate you.

See more in our 11 scenarios below to find your specific transfer or contribution situation.

Switching IFISAs mid-year

Scenario 1: You have contributed new money this tax year to a new IFISA you just opened and now you want to open another new IFISA and transfer those new contributions to it, all within the same tax year.

You are allowed to do that, but you have to transfer all of the contributions, so that only one IFISA in a tax year contains new IFISA contributions. You can also then continue to contribute more into that same IFISA if you haven't reached your overall contribution limit yet.

Scenario 2: You made new contributions this tax year to an existing IFISA (that you opened in a previous tax year), but now you want to open a new IFISA.

You may still open a new IFISA for new contributions if you now transfer all the new contributions that you have already made this year from the existing IFISA to the new one. You can then continue to add more new contributions in the new one if you have not reached your total annual ISA limit.

You do not have to transfer the existing contributions that you made in previous tax years from the existing IFISA to the new one.

Scenario 3: You have contributed new money this tax year to a new IFISA and now you want to transfer it to an old IFISA that you opened in a previous tax year.

You are allowed to do that, but you have to transfer all the new contributions and now you can only add further new contributions in that same IFISA.

Transferring money from previous IFISA years

Scenario 4: You want to transfer existing IFISA money (from previous tax years) to a new IFISA.

You can do this without affecting your ISA limits, meaning if you've already opened a new IFISA for new contributions this tax year, that doesn't stop you for opening another new IFISA solely for transferring existing IFISA money. Or you could transfer it to the same new IFISA where you're adding your new contributions for the year.

Technically, you are allowed to transfer either all or part of your existing IFISA money from previous tax years over to the new IFISA. However, you might find that some IFISA providers set their own rules and limits on that.

Scenario 5: You want to transfer existing IFISA money to another existing IFISA.

You can transfer all or part of your money in this way between your IFISAs.

Transferring from or to cash ISAs

Scenario 6: You want to transfer old money from a cash ISA to an existing or new IFISA.

You are allowed to do this without limit.

Scenario 7:  You want to transfer newly contributed money from a cash ISA to an existing IFISA.

You may do that, but you are only allowed new contributions in one IFISA per year, so this has to go where the rest of your IFISA contributions are going this year.

Scenario 8: You want to transfer newly contributed money from a cash ISA to a new IFISA.

As with scenario 7, you may do that, but you are only allowed new contributions in one IFISA per year, so this has to go where the rest of your IFISA contributions are going this year.

Transferring from or to stocks and shares ISAs

You must sell any investments in your stocks and shares ISA before you can transfer to an IFISA, with the transfer taking being in cash.

Scenario 9: You want to transfer old money from a shares ISA to an existing or new IFISA.

You are allowed to do this without limit.

Scenario 10:  You want to transfer newly contributed money from a shares ISA to an existing IFISA.

You may do that, but you are only allowed new contributions in one IFISA per year, so this has to go where the rest of your IFISA contributions are going this year.

Scenario 11: You want to transfer newly contributed money from a shares ISA to a new IFISA.

As with scenario 10, you may do that, but you are only allowed new contributions in one IFISA per year, so this has to go where the rest of your IFISA contributions are going this year.

Withdrawing your money

You can withdraw money from your IFISA at any time, subject to the normal rules each peer-to-peer lending website has about selling loans and exiting early.

If you withdraw money in the same year you put it in, you will usually lose that part of your ISA allowance for the year.

Flexible ISAs

…However, your IFISA provider will tell you if it is a “flexible” ISA. This means that you can withdraw cash from your IFISA and then replace it in the same tax year. Replacing that amount will not count towards your annual ISA allowance. If you don't replace it within the same tax year, i.e. between 6th April one year and 5th April the next, you will lose that part of your allowance for that year.

IFISAs have no extra costs – usually

So far, most P2P lending platforms that have launched an IFISA have not charged lenders extra for buying, selling and holding loans through your IFISA – although some will charge you for transferring out.

You'll be able to lend as normal in the same way as you have been outside of the ISA.

There are a few exceptions that charge extra. Property Crowd charges just shy of 1% per year (0.95%) and CreditRise forecasts returns that are 0.5% lower due to the in-built costs, while hinting that those costs will double at some point.***

Minimum lending amounts

Most P2P lending sites are using the same minimum lending amounts for their IFISA products as they do for their other lending accounts. This is typically between £1 and £100, although £500 is also fairly common, and £1,000+ rare.

Landbay is an exception. It has announced a minimum of £5,000 for its IFISA compared to £100 in its other lending accounts. LendingCrowd has a minimum of £1,000, although one of its non-IFISA products offers lending for as little as £20.

The risks of using IFISAs

The risks of using IFISAs for your P2P lending are fairly small:

  • You don't know if the costs will change after you move your money in. (You have a right to leave without exit charges in that case, provided you let the ISA provider know swiftly. If they try to charge you, get the powerful Financial Ombudsman Service to put it right for you.)
  • Laws and taxes regarding ISAs might change out of your favour. However, since you can get your money out of ISAs relatively easily, you might still have a chance to pull out before a negative change takes effect.

 

The usual risks of P2P lending also apply. For more on that, read Is Peer-to-Peer Lending Safe For Lenders? and The Five Key Risks In Peer-To-Peer Lending.

Where do you go to open IFISAs?

Most P2P lending sites are providing IFISAs drectly to you from their own websites. Soon, though, we will see a few IFISAs from external companies that allow you to lend across several different P2P lending sites at once.

You will be able to see all of the IFISAs in the list of IFISAs near the top of this guide and we'll link to them in our comparison tables too.

Time can be of the essence

IFISAs will be popular so you might find that getting your money inside the IFISA and out on loan at present is not so easy.

4thWay 5 PLUS-rated P2P site Lending Works*, launching its IFISA on 8th February 2017, received twice the cap it set of £1 million on initial IFISA applications – within 24 hours.

Even so, when you feel time is of the essence, never rush to lend or invest before you are 100% confident you understand the risks.

Read more on taxes:

How is Peer-to-Peer Lending Taxed?

The P2P Pensions Guide Page.

*Commission and impartial research: our service is free to you. We already show dozens of P2P lending companies in our accurate comparison tables and we keep adding more as soon as they provide us with enough details. We receive compensation from Crowd2Fund, HNW Lending, Landbay, LendingCrowd, Lending Works, Rebuildingsociety and Relendex, and other P2P lending companies not mentioned above when you click through from our website and open accounts with them. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

**We put any and all P2P lending sites in our comparison table as soon as they provide us with over 100 data points and discuss their processes and key people with us.

***Says Peer2Peer Finance News.

Today’s average interest rates

4thWay® Forecast Returns Index: 5.07%

Showing average expected interest rates for individual lenders after fees and bad debts if you lend today.
Read about the first P2P lending index.

What is the “4thWay”?

There's the savings way, the property way, the stock-market way, and now there's the peer-to-peer lending way. The 4thWay® to save and invest.
Learn more.

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We help people save and make more money, more safely when they cut out the banks and lend directly to other people and to businesses.

Why use 4thWay?

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Orchard’s interest rates different?

Orchard’s lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Orchard’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

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