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How to start saving into an IF-ISA with £100

How to start saving into an IF-ISA with £100 

ISA season is fast approaching and if you’re looking for a new home for your lockdown savings, especially one that’s tax free, now’s the time to start thinking about where that might be.

But how much do you need to open a new ISA account, is £100 a good starting point for an IF-ISA, for example? Or do you need a bigger sum of money? Here we look at how to start a new savings habit with £100, the rules around opening and transferring ISA money, and the kind of interest you could earn.

Where should you put your lockdown savings?

Christmas has only just been packed away but there’s no time like the present to start thinking about your ISA allowance, and more importantly the upcoming ISA deadline.

During the various coronavirus lockdowns, many of us who were lucky enough to keep our jobs were able to build savings pots, due to not being able to go out, socialise, or on holiday.

It’s estimated by the Bank of England that there is a collective pot of around £200billion locked away. If you were able to stock up your savings, and they are now lingering in an account earning no interest, it’s time to start making them work for you.

The type of ISA you pick will depend on your circumstances. How much you have to put away, when you might need to access the money again, what your current savings goals are, and what your attitude towards risk is. 

A cash ISA, for example, is unlikely to earn much interest, especially in the current climate, but your money is safe and can be withdrawn according to the terms of the account.

An IF-ISA on the other hand, where you lend money out to businesses and earn interest on it, could earn much higher returns. The average returns for IF-ISAs reached 9 per cent for the past two years - but there is a risk you won’t get your money back. 

No matter what size your savings pot is, there’s an account for it. You have many options but the benefit of an ISA is that any returns will be tax free. If you want to take advantage of this year’s tax benefits, you’ve got until April 5 to do so. This is when the current tax year ends, and a new tax year begins. 

What account can you open with £100?

Now you’ve decided upon an ISA, it’s time to choose an account. The first thing to think about is how much you want to put away. If it’s £100, you’ll need to find an account that lets you deposit this amount. 

With cash ISAs, it’s generally pretty easy to find an account with a minimum deposit of £100 but it can be a little harder with stocks and shares ISAs or with an IF-ISA. However, this doesn’t mean it can’t be done, and those with smaller savings pots shouldn’t automatically discount these options.

The easyMoney IFISA has minimum deposits of just £100, for example. Many other providers offer accounts with similar - and in sometimes smaller - starting deposits. Please remember your capital is at risk and not covered by the Financial Services Compensation Scheme (FSCS). This is not a cash savings account. Instant access is not guaranteed. Past performance does not guarantee future results. 

Is it better to deposit a lump sum or regular amounts of money?

This depends on a few factors including the amount of money you have to put away. If you’ve got a windfall, a lockdown savings pot or perhaps an inheritance, you’ll be looking for an account to put that lump sum.

However, if you have extra money each month you’d like to put away - depositing a regular smaller amount may be best for you. 

Either way, putting the money somewhere it will earn interest is crucial - as leaving it in an account where it doesn't earn anything will effectively lose you money as inflation - currently at a 10-year high of 5.1 per cent - will eat away at it.

You don’t have to put it all in one place either. You may decide to keep a sum in a cash ISA you can access, such as for unforeseen expenses if they come up, another amount in a fixed-term cash ISA, and then have a separate IF-ISA for the rest of your savings. 

The current yearly ISA allowance is £20,000, you can put the entire amount into one ISA or split the amount into different types of ISA accounts.

To count towards this year’s allowance, it needs to be put into an ISA by April 5. On April 6 you’ll get a new ISA allowance, but you can’t roll over the previous year’s allowance - it disappears at the end of the tax year.  

Are there any barriers in place to stop you opening an IF-ISA?

Opening an IF-ISA will depend on certain rules. These include the following:
 

  • Minimum deposit: You’ll need to make sure you can open an IF-ISA with £100 (or the amount you are looking to transfer)
  • Age: To open an IF-ISA you’ll need to be at least 16
  • Yearly allowance: Each tax year everyone gets a new ISA allowance, it’s £20,000 for the 2021/2022 tax year and you have until April 5 to use this.

It’s also worth keeping in mind the fact you’re able to switch money within an ISA between providers if you’ve seen a better account you’d like your money to be in. However, in order to do this you must make sure to do it in the correct way. 

Once you’ve found a new IF-ISA (or whichever type of ISA you’re looking at), use the new provider’s transfer form. It will move the money over for you, so you don’t need to do this yourself. Don’t ever withdraw money from one ISA and deposit it into a new one, as you’ll lose the tax benefits.  

All the facts and figures presented are accurate at the time of posting.

easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.

easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.

Written by The easyMoney Team

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