Innovations to utilise your tax allowance – City A.M.

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The Innovative Finance ISA (IFISA) launched in April 2016, enabling individuals to enjoy tax-free earnings on their peer- to-peer (P2P) investments in the same way as a stocks and shares ISA.

There are now dozens of increasingly popular products on the market, offer- ing a variety of investment opportunities and returns.

These peer-to-peer investments broad- ly fall into three sectors: Consumer, SME and Property Lending.

There are two ways to invest in an IFISA. Customers can either invest manually or defer to the platform’s auto- invest function and let this do the hard work. Notably the ‘big three’ lenders – RateSetter, Funding Circle and Zopa – purely offer auto-invest options. The oldest of these lenders, Zopa, launched its IFISA to existing customers last July and to new investors this January. This IFISA, which invests in consumer loans, advertises a rate of four per cent a year in ISA Core, or 4.6 per cent a year in the higher-risk ISA Plus. It is a flexible ISA, meaning you can take out your money and deposit it back within the same tax year, without affecting your tax-free allowance. There is a minimum investment of £1,000.

Another peer-to-peer consumer lender with an IFISA on the market is Lending Works. Launched in February 2017 it offers an annual return of six per cent for five-year loans or 4.5 per cent for three-year loans. This is an auto-invest product with a minimum investment of £10.

Proplend are also offering peer-to-peer investment within an IFISA, secured against first charges on commercial property. Investors can expect returns of between five per cent and 12 per cent.

For investors who want to lend to businesses, Funding Circle launched its IFISA last November but the tax wrap- per is currently only available to existing customers.

There are two investment options to choose from: ‘Balanced’, for a projected return of 7.2 per cent; and the lower-risk ‘Conservative’, for a projected return of 4.8 per cent.

One of the earliest platforms to launch its IFISA was Crowd2Fund, which offers investors an 8.7 per cent target return for investing in UK businesses. Customers can choose which projects to invest in, with a minimum investment of £10.

Straddling a number of sectors is RateSetter, which lends to individuals, businesses and property developers. It launched its IFISA to existing customers last month and opened the tax wrapper to new investors at the start of March. Interest rates will vary as they are set by supply and demand, but investors can currently earn up to five per cent depending on the dura- tion of the investment chosen.

The minimum investment in this flexible IFISA is £1,000.

There are also options for the more socially conscientious investor, such as Triodos Bank which specializes in investing in organisations that provide positive change. It has three bond offers, with interest rates ranging from five per cent to seven per cent. Their IFISA is available alongside traditional stocks and shares ISAs.

Another supplier Assetz Capital pro- vides business, property and green energy loans, which can be held within an IFISA wrapper. Its auto-invest accounts offer returns ranging between 3.75 per cent and seven per cent, while people can earn up to 15.5 per cent by manually choosing their investments.

With lots of providers to choose from, there should be an IFISA to suit every- one before 5 April.

Suzie Neuwirth is Founder and Editor-in- Chief of Peer2Peer Finance News,

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