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What is an IFISA?

Innovative Finance ISA

We have created this beginners guide to IFISA’s to explain everything you need to know about what an Innovative Finance ISA (IFISA) is, providing you with the information, tools and resources to help you to determine whether opening an IFISA account may be the right financial decision for you.

Innovative Finance ISAs Explained

An Innovative Finance ISA (IFISA) is an investment that offers consumers the opportunity to utilise a peer to peer lending network, which allows them to lend funds while earning tax-free interest. The platforms behind these IFISA’s, such as our team here at easyMoney, are able to pair up willing lenders or investors with individuals and businesses looking to borrow, making it a streamlined, simplistic process for all parties. While there are risks involved, we take steps to carefully craft a diverse loan portfolio, designed and reviewed by our experts.

Can An IFISA Benefit The British Economy?
Peer to peer lending can be beneficial to British businesses, offering them an opportunity to access otherwise unavailable finance, boosting their cashflow and then subsequently the local economy too.

Are IFISA’s Covered By FSCS?
No, IFISA’s are not covered by the Financial Services Compensation Scheme (FSCS) because they are peer-to-peer investments.

What Returns Can You Expect From An IFISA?
IFISA rates will typically vary between providers, but you could earn anywhere on average between 3.5% - 7.01% gross per annum. Some providers may also offer significant bonuses for sign-ups, which will often boost your immediate return. While there are risks involved and returns cannot be guaranteed, long-term investments will often earn higher interest rates.

The Pros and Cons of IFISAs
Favourable Aspects
  • + Tax-free investments
  • + Flexible terms
  • + A variety of reputable providers on the market, with proven track records.
  • + Maximum investment of up to £20,000 per tax year.
Less Favourable Aspects
  • - Not FSCS protected
  • - Capital is at risk
  • - There are a multitude of factors that may affect interest rates, such as bad debts or deal flow.

The Difference Between IFISAs and Other Types Of ISA

There are a variety of different types of ISA available, which may be more or less suited to your needs. We have taken the time to explain each of these account types below, so you can make an informed decision.

Cash ISAs

A standard Cash ISA is available to any UK resident aged 16 or over. These will allow contributions up to £20,000 per tax year. There are two different types of account available, either ‘easy access’ or ‘fixed-term’. Fixed-term means your funds will be inaccessible for an agreed amount of time, i.e. 3 or 5 years, while ‘easy access’ can be withdrawn at any time. Typically the duration of this commitment will impact the rate of the return you receive.

Stocks & Shares ISAs

Stocks & Shares ISAs are available to any UK resident aged 18 or over and allow you to put your money into a portfolio of different tax- efficient investments, including individual shares, investment funds, trusts and government bonds, which tend to offer the possibility of higher returns than Cash ISAs. Please note that capital is still at risk with any kind of investment.

Lifetime ISAs

A Lifetime ISA is an opportunity for anybody over the age of 18, but under the age of 40, to save money for a specific cause. This is either for purchasing your first home, or saving for later life. Any funds you place into these accounts will receive a 25% government bonus, although there is a limit of up to £4,000 per year which means you would receive a £1,000 bonus. You can hold cash or stocks and shares in your Lifetime ISA, or a combination of both, depending on your provider.

Am I eligible for an IFISA?

Anybody who is a UK resident over the age of 18 with a National Insurance Number is eligible for an IFISA.

What are the rules surrounding IFISAs?

We have outlined some of the rules surrounding IFISAs below to answer some of the common questions you might have.

How much money can I invest in an IFISA?
The maximum investment in an IFISA is currently £20,000 per person, per tax year. This can be split across various different types of ISA, but you must ensure you do not exceed this limit collectively.

You can also invest previous year ISA investments into IFISA accounts. The Financial Conduct Authority (FCA) recommend that you do not invest more than 10% of your assets into Peer-to-Peer lending unless you are a sophisticated or high net worth investor.

How much money do I need to open an IFISA?
The initial investment amount will vary between providers and can range from £1 to £10,000. Here at easyMoney, we currently have various options available starting from initial deposits of £100.

How many ISA accounts can I have?
For each new tax year, you can invest your ISA allowance across the range of ISAs, but you can only have one of each type. There is no limit to the number of ISA accounts you can hold which relate to previous tax year investments. You are allowed to spread previous year investments across as many different ISAs as you like, you just need to fill in the ISA transfer paperwork for chosen provider and let them know how much you would like to invest.

Can you open an IFISA if you live abroad?
Current year IFISAs are available to UK residents only. However, there are some exceptions - If you or your spouse performs duties of a Crown employee, such as being a member of the UK armed forces, a diplomat or a civil servant, and these duties are treated as though they are being performed in the UK, then you may be eligible for opening an IFISA. Speak to a provider for more information. In addition, if you have an ISA account from a previous tax year, but are no longer a UK resident, this can be held in an IFISA or transferred to an IFISA account.

How To Get Started With Setting Up An IFISA

If after reviewing all of the information we have provided you feel that an IFISA may be the right option for you, then the next thing to do will be to search for a suitable provider that will meet your needs. Below, we have outlined some information about our own IF- ISA options here at easyMoney, to offer you the resources you need to make your own well-informed decisions.

Setting Up An easyMoney IFISA?

What we offer
We have a variety of options available depending on the amount of your investment. As your investment level increases, you will automatically move to a higher target rate on the monthly interest anniversary date, currently 15th of the month. You have the right to ask to withdraw at any time, but please note that instant access to funds cannot be guaranteed.

Choose your investment amount

As your investment level increases you automatically move to a higher target rate on the monthly interest payment day, which is currently the 15th of the month.
You can request to withdraw at any time, but please note that instant access to funds is not guaranteed. If your funds are invested in a loan which has less than one month before it is due to be repaid or reviewed, or if you are invested in an unperforming loan then you will have to wait either for the loan to be extended or repaid in order to receive your funds.

Tax-free Classic

Min. £100

3.08%

target rate p.a.

  • Interest paid monthly
  • Ask to withdraw any time**
  • Backed by UK property
  • Investor support hotline
  • Transfer in an existing ISA
Tax-free Premium

Min. £10,000

4.03%

target rate p.a.

  • Interest paid monthly
  • Ask to withdraw any time**
  • Backed by UK property
  • Investor support hotline
  • Transfer in an existing ISA

NEW

Tax-free Premium Plus

Min. £20,000

5.02%

target rate p.a.

  • Interest paid monthly
  • Ask to withdraw any time**
  • Backed by UK property
  • Investor support hotline
  • Transfer in an existing ISA
Tax-free High Net Worth

Min. £100,000

6.01%

target rate p.a.

  • Interest paid monthly
  • Ask to withdraw any time**
  • Backed by UK property
  • Investor support hotline
  • Transfer in an existing ISA

We assess each of our peer to peer loans individually and the ‘Target Rate’ shown is representative of the average across the range of interest rates on our loans. We will only lend on carefully vetted property loans across different risk ranges. To find out more, visit our help pages here.

Exclusive Benefits Available

Those who invest £1,000 or more with us will benefit from our easyMoney plus membership card, for FREE. This savings card provides amazing discounts and cashback with over a thousand of the Britain’s leading retailers, the discounts can be used both in-store and online, saving you even more money each year!

FREE ACCOUNT REGISTRATION

  • Available to both regular and tax-free Innovative Finance ISA investors
  • Earn tax-free interest and invest all or part of your ISA allowance (£20,000). Tax treatment depends on individual circumstances and may be subject to change.
  • Option to transfer in existing ISAs

Your capital is at risk. This type of investment is not covered by the Financial Services Compensation Scheme. Tax treatment dependent on individual circumstances and subject to change.
Please read our Risk Assessment.

FREE ACCOUNT REGISTRATION

Sign-up and start your Regular or IFISA account

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Launch the help pages to read more about investing, risks and how we manage them