ISA

  1. ISAs & P2P lending: The basics

    ISA stands for “Individual Savings Account”. However, this is not any ordinary account, and does not necessarily need to be a bank account.

    Quite simply, an ISA is a special account with a tax wrapper which allows you to save and invest money with valuable tax benefits. This “wrapper” allows any income or profits from these savings and investments to be free from income and capital gains tax. 

    From 6 April 2016, in each tax year individuals can subscribe to: 

    • one cash ISA;
    • one stocks and shares ISA; and 
    • one innovative finance ISA 

    You cannot subscribe to more than one cash ISA, more than one stocks and shares ISA, or more than one innovative finance ISA in the same tax year. 

    You can, however, split your money between all three of these ISA categories in any amount you choose (subject to the overall annual ISA limit).  

    The tax year begins on 6 April each year and ends on 5 April (inclusive) the following year.

    A reference to previous tax years is always a collective reference to funds you have placed into an ISA in previous tax years and which have remained in an ISA ever since (though this does not have to be the same ISA).

    What is an Innovative Finance ISA?

    An Innovative Finance ISA (IFISA) is a new category of ISA which became available from 6 April 2016. 

    The IFISA allows interest and gains from peer-to-peer loans to qualify for tax advantages where these loans are made within an ISA.

    The IFISA acts as a wrapper around eligible loans, or where there is more than one lender in relation to a loan, each lender’s individual loan parts, allowing any interest on that loan or respective loan part to be free of income tax.

    More generally, lending through an Innovative Finance ISA will mean all interest received on your loans, and any profits made through sale of your rights under a loan agreement, will be exempt from income tax and capital gains tax.

    However, payment of tax depends on your personal circumstances, and rules on payment of tax may change in the future.

    We suggest you seek advice from an independent financial and/or tax advisor should you have concerns or questions about payment of tax before you open a Lending Works ISA.

    Remember you are entirely responsible for the management of your tax affairs including making any returns and payments of tax and complying with any applicable laws and regulations. We will not be sending any returns or documents to HMRC on your behalf, nor paying any applicable tax from your ISA or Classic Account.

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  2. Opening your Lending Works ISA

    Opening a Lending Works ISA only takes a few minutes. To start earning tax-free P2P returns, simply follow these easy steps:

    • Create a Classic lender account, or sign in to an existing account if you are already a lender
    • Click 'Open my ISA' from the dropdown at the top right of your lender dashboard
    • Complete the ISA application form
    • Accept the declaration, and click 'Open my ISA' to confirm

    That's it! We'll get back to you very quickly to confirm that your ISA has successfully been opened.

    Please note that in order to open an ISA with us, you must meet the following criteria: 

    • You must be 18 years of age or over; and
    • You must be resident in the United Kingdom for tax purposes or, if not so resident, either perform duties which, by virtue of Section 28 of Income Tax (Earnings & Pensions) Act 2003 (Crown employees serving overseas), are treated as being performed in the United Kingdom, or I am married to, or in a civil partnership with, a person who performs such duties

    To place new funds into your Lending Works ISA:

    • You must not have subscribed to more than the annual ISA Limit in total to a cash ISA, a stocks and shares ISA, and an Innovative Finance ISA (or a combination) in the current tax year; and
    • You must not have subscribed to another Innovative Finance ISA in the current tax year

    If you think you do not meet the criteria above or do not do so after you have opened a Lending Works ISA, you must let us and HMRC know immediately.

    We may ask for proof of any of the above and you will be asked to sign a declaration which we are required to obtain by HMRC.

    To open a Lending Works ISA, you will need to register as a lender on our platform by opening a Lending Works account.

    You will then have the option of opening an ISA by following the process set out above. You will need to sign our ISA Terms and Conditions, in addition to a declaration which is required under the ISA Rules.

    Once you have created your ISA, you can add new ISA funds to your account using the process set out in your ISA.

    You may also transfer the following into your ISA:  

    • Current-year subscriptions placed in an ISA with another ISA Manager in the current tax year (subject to limitations); and
    • Subscriptions from previous tax years held in any existing ISA(s) with other ISA managers

    Each individual will need to have their own Lending Works account (which includes your ISA). Each individual must also become a Member and ISA Investor in their own capacity, and open their own Lending Works account (which includes your ISA) with us.

    Please note: ISAs are only available to individuals and not legal entities such as businesses.

    Will I earn interest on my money as soon as my funds are placed into my Lending Works ISA?

    No. Unlike a cash ISA, you will only start earning interest on your funds once they are on loan to borrowers. If you do not make any lending offers within your ISA, you will not gain any interest.

    New ISA subscriptions to your Lending Works ISA will still count towards your annual ISA limit whether they are on loan or not.

    Please note: There can be a lag of up to 14 days from when you make a new lending offer to when your funds are lent under one or more loan agreements. However, funds re-invested are usually re-lent within one business day.

    Why do I need to sign a declaration?

    When you apply for a Lending Works ISA, we are required by law to ask you to sign a declaration. You will only need to do this once - provided you subscribe funds to your ISA each tax year.

    If an entire tax year passes without any further subscriptions from you, we are required by law to ask you to sign a new declaration. Until you do this we will not be able to accept any new subscriptions or effect any transfers in or out of your ISA. This will not impact the funds already in your ISA and those on loan, including repayment of capital and interest on those funds.

    What is an ISA manager?

    An ISA manager is a firm who is approved by HMRC to open and manage ISAs for customers. Lending Works is an ISA Manager.

    By signing our ISA Terms and Conditions and ISA Declaration you authorise us to be your ISA manager in relation to your Innovative Finance ISA.

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  3. Investing in your ISA and annual limits

    You can subscribe up to £15,240 into ISAs in the current tax year 2016/17. This is referred to as the “Annual ISA Limit”. The annual ISA limit may change for future tax years.

    You can put your entire annual ISA limit into any of the three categories of ISA (cash ISA, stocks and shares ISA and Innovative Finance ISA) or spread this amongst all three (in any amounts you prefer); provided that:

    • You do not exceed the annual ISA limit; and
    • You do not subscribe to more than one cash ISA, more than one stocks and shares ISA, or more than one innovative finance ISA in the same tax year

    Also, remember that the annual ISA limit is only relevant to funds subscribed in the current tax year. There is no limit to how much you can put into a Lending Works ISA in relation to funds subscribed in previous tax years.

    What if I exceed the Annual ISA Limit?

    It is your responsibility to ensure you do not exceed the annual ISA Limit in any tax year. For the current tax year this is £15,240.

    If you think you have exceeded the annual ISA Limit you must contact us immediately. 

    You should also contact HM Revenue & Customs (HMRC) using the ISA helpline on 0300 200 3312 and flag that you have exceeded the limit.

    It is likely that you will be required to pay tax on the amount exceeded at the tax rate that applies to you. You could also be liable to a penalty or other fines by HMRC in relation to the breach.

    What if I send you funds in excess of the Annual ISA Limit?

    If you send us a payment of more than the annual ISA limit, or if you send us any payment which, when applied to your Lending Works ISA, would mean that your total current year subscriptions would exceed the overall annual ISA limit, we will place any excess into your Classic Account. You can then either withdraw that amount from your Classic Account using the process set out within your Lending Works account, or use that money to lend using your Classic Account.  

    But remember if you choose to re-invest repayments within your Classic Account, any such funds placed in your Classic Account as a result of over-funding your ISA may be placed on loan very quickly and you may not get the chance to withdraw them.

    Can I make monthly payments to my Lending Works ISA?

    Yes. You can make regular payments into your Lending Works ISA, provided your total monthly payments in the current tax year do not exceed the overall annual ISA limit of £15,240.

    For example, instead of paying £15,240 of new ISA funds into your Lending Works ISA on 6 April 2016, you could instead make 12 monthly payments of £1,270.  

    How many times can I pay into my Lending Works ISA?

    There is no limit to the number of payments you can make into your Lending Works ISA. However, the total value of those payments which relate to new subscriptions cannot exceed the overall annual ISA limit for the current tax year.

    Does interest received on loans count towards the annual ISA limit?

    No. The annual ISA limit (£15,240 for the current tax year) applies only in relation to funds you subscribe (add) to your ISA(s). Any interest or other income you receive on those funds will not impact your annual ISA limit.

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  4. ISA transfers

    You are free to transfer existing ISAs to Lending Works, and you don’t have to wait until the end of the current tax year to do so.

    If you're transferring ISA funds you've subscribed to another ISA in the current tax year, you'll need to transfer the balance in full, including any income you've received on those subscriptions.

    Do the same restrictions apply to ISA funds accumulated in previous tax years?

    You can transfer ISA funds accumulated in previous tax years without restriction. You can even split the funds and transfer as much or as little as you like. It does not matter which category the previous ISAs fall into.

    How can I transfer my existing ISA to Lending Works?

    Whether you are transferring ISA subscriptions from the current or previous years, you will need to follow the transfer process set out in your Lending Works account. This will involve completing and authorising a transfer request form. We will then get in touch with your existing ISA Manager directly and aim to complete the transfer for you within 30 days.

    You must not make this transfer yourself by withdrawing the funds and sending these to Lending Works. This could result in withdrawal of your funds from your ISA and loss of ISA tax benefits on those funds. If you are unsure, please contact us before you take any action.

    Can I transfer my Lending Works ISA to another ISA provider?

    Yes, you can, provided the funds in your Lending Works ISA you wish to transfer are held in cash i.e. not on loan or allocated to a loan.  If they are, you will either need to wait until funds are repaid on your loans or use the Quick Withdraw facility to access your funds early. There are also a few restrictions on transfers which are set out below, due to the ISA Rules.

    Current tax year subscriptions:

    You can only transfer funds in relation to current-year subscriptions (including any interest earned on those funds) in full to another provider i.e. you cannot transfer part of these funds.

    Previous tax year subscriptions:

    Unlike current-year subscriptions, you can transfer any amount in relation to subscriptions made in previous tax years. You can do this in as many separate transactions as you like.

    How can I transfer my Lending Works ISA to another ISA provider?

    Whether you are transferring ISA subscriptions from the current or previous years, you will need to follow the transfer process provided to you by your new ISA manager (to whom you wish to make the transfer). This will involve completing and authorising a transfer request form. Your new ISA Manager will then get in touch with us to complete the transfer for you within 30 days. You should speak to your new ISA manager about this.

    You must not make this transfer yourself by withdrawing the funds and sending these to Lending Works. This could result in withdrawal of your funds from your ISA and loss of ISA tax benefits on those funds. If you are unsure, please contact us before you take any action.

    Will I be charged for transferring ISA balances in or out?

    No. We won't charge you for transferring your Lending Works ISA to another provider or for receiving a transfer from any existing ISA, but your new or existing ISA manager may apply administration charges for the transfer, such as for supplying information.

    Unfortunately, we're unable to refund any charges made by your new or existing ISA manager, or refund any interest and/or bonus you may lose by transferring. Please check any charges or penalties with your new or existing ISA manager before requesting any transfer of funds.

    Are there any restrictions on how much I can transfer from existing ISAs?

    As set out above, any funds subscribed in the current tax year must be transferred in whole (including any interest).

    Any funds subscribed in previous tax years can be transferred in any amount or any number of transactions.

    How many transfers can I make each year?

    In the current tax year, you can transfer in or transfer out any number of previous tax years' subscriptions.

    What if I transfer funds to you on the last day of the tax year?

    If you transfer funds to us on the last day of the tax year (for example on 5 April), provided these funds are cleared in our client bank account on the last day of the tax year, these will count as a transfer within the current tax year, even if these are not immediately allocated to your ISA. 

    Please note: If you transfer funds on a non-business day they may not clear in our client bank account until the next available business day.

    If in the unlikely scenario you send us funds before you have opened an ISA with us (though you should never do this), your funds will not be treated as received by us until your ISA has been opened.  

    If you are opening an ISA and/or transferring in funds towards the end of the tax year, we suggest you give yourself sufficient time to avoid losing any remaining annual ISA limit. You should avoid leaving subscriptions to the last day of the financial year where at all possible.

    Can I move my existing loans into my Lending Works ISA?

    No, unfortunately this is not possible. However, you can use the Quick Withdraw facility to sell your rights under the loan agreement to one or more other lenders, then move the proceeds of sale from your Classic Account to your ISA.

    Please note: Early access to your funds is not guaranteed and relies on there being lenders available to purchase your loan chunks.

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  5. Opening multiple ISAs and subscriptions

    Can I open an Innovative Finance ISA with Lending Works and another type of ISA with another ISA Manager in the same tax year?

    Absolutely. In the current tax year, you can add new funds to your Lending Works ISA (i.e. into an Innovative Finance ISA) and new funds into a different category of ISA with another ISA manager (for example a Cash ISA with a bank).

    However, your total subscriptions for the current tax year across all three ISA categories must not exceed the annual ISA limit.

    Can I open multiple IFISAs in the same tax year?

    Again, the answer here is yes. You are free to open any number of IFISAs with any number of platforms as you wish.

    However, you can only subscribe new funds into one Innovative Finance ISA in the current tax year. This means you cannot add new funds into your Lending Works ISA and also add new funds with another peer-to-peer lending platform in the same tax year, even if you have not reached the annual ISA limit.  

    You can, however, transfer all of your current-year subscriptions to another peer-to-peer lending platform in the current tax year. Once this transfer has been effected, you will then be able to add any further funds with the new peer-to-peer lending platform - provided you remain within your ISA annual limit. You will also no longer be able to subscribe any funds to the IFISA you held previously either.

    Alternatively, you can add new funds with one peer-to-peer lending platform and transfer funds subscribed in previous tax years to another peer-to-peer lending platform, both in the same tax year.  In both cases you will need to open an ISA with each peer-to-peer lending platform.

    Can I access next year’s annual ISA subscription now?

    No. You can only add new funds to your ISA in respect of the current tax year. You cannot make future-dated subscriptions to Lending Works or any other ISA provider.

    However, you can set up future-dated payments from your bank account e.g. a standing order which will allow regular payments into your Lending Works ISA in the current tax year.

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  6. Your ISA and tax

    We will only report to HMRC as required under the ISA Rules, and will not take responsibility for communicating with HMRC on your behalf. You will still remain responsible for dealing with HMRC with regards to your own personal taxation.

    Will Lending Works complete my tax returns?

    No. This will remain your responsibility entirely. If you are unsure of what to do or how to do this, you should speak to an accountant or tax advisor.

    Do I need to mention my Lending Works ISA in my tax returns?

    Generally, (and provided you have complied with the ISA Rules) you will not need to declare income and gains from your Lending Works ISA on your tax returns. You should however discuss this with an accountant or tax advisor as we are unable to advise you on what you should or should not include in your tax returns.

    If you need to contact HMRC, the number for the HMRC helpline is 0300 200 3312.

    What is the Personal Savings Allowance?

    From 6 April 2016, if you are a basic-rate taxpayer you will be able to earn up to £1,000 in savings income, including interest on peer-to-peer loans, tax-free. Higher-rate taxpayers will be able to earn up to £500. This is called the Personal Savings Allowance. If you are an additional-rate tax payer, the Personal Savings Allowance will not apply to you.

    This is not dependent on or connected to your Lending Works ISA but could be used side by side. For example, you could invest £15,240 of current year subscriptions into your Lending Works ISA and any interest you receive on this will be tax-free. In the same tax year, you could also lend around £20,000 using your Classic Account (assuming an annual interest rate of 5%) and the interest you receive would also be tax-free provided you are a basic-rate tax payer, the interest in your Classic Account does not exceed £1,000 each year and you have no other interest income (for example, from a bank savings account). 

    We suggest you seek advice from an independent financial and/or tax advisor should you have concerns or questions about the Personal Savings Allowance.

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  7. Withdrawing from your ISA and account closure

    If, in the first 14 days after you open a Lending Works ISA, you change your mind and decide you would like to cancel your account, you have a statutory right of cancellation. This is also set out in the ISA Terms and Conditions.

    Any current-year subscriptions during this cancellation period will be returned to you and will not count towards your annual ISA limit. You will also need to transfer any funds subscribed in previous tax years which you transferred during this cancellation period to another ISA manager. Provided this is satisfied, you will still be able to open another Innovative Finance ISA with us or any other ISA manager, or alternatively a different type of ISA with another ISA provider. Your full annual ISA limit will remain intact.

    However, if in the first 14 days any funds subscribed in the current year, or funds transferred from another ISA manager in respect of previous years’ subscriptions, are and remain allocated to a loan, or are on loan under a loan agreement, you will lose this cancellation right.  

    After the cancellation period, you can still close your Lending Works ISA as set out in the ISA Terms and Conditions, but you will not be able to benefit from the intact annual ISA limit for current year subscriptions.

    Can I withdraw funds from my Lending Works ISA?

    You can withdraw funds from your Lending Works ISA at any time, provided they are held in cash (i.e. not part of an allocated lending offer or already on loan).

    Please note: If you decide to take funds out of your Lending Works ISA, you will not be able to replace these again in the same tax year and will lose any tax benefits on these funds.

    How can I close my Lending Works ISA?

    To close your Lending Works ISA you can either: 

    • Request a transfer of your full account balance to another ISA manager (you can only do this once all funds are in your Wallet i.e. not on loan or allocated to a loan); or
    • Withdraw all funds within your Lending Works ISA (again, you can only do this once all funds are in your Wallet i.e. not on loan or allocated to a loan). Please note: If you decide to take funds out of your Lending Works ISA, you will not be able to replace these again in the same tax year and will lose any tax benefits on these funds

    Once you have completed the above please contact our Customer Service team to close your account.

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  8. Other FAQs relating to ISAs

    I am not sure if an ISA is the right product for me?

    We cannot advise you as to whether a Lending Works ISA is the right choice for you. If you are unsure, we suggest you seek advice from an independent financial and/or tax advisor.

    My deceased partner had a Lending Works ISA. Can I inherit their allowance?

    Upon the death of an ISA Investor, their entitlement to tax exemptions will end. This does not mean that previous tax exemptions will be lost on ISA funds already within the ISA. However, any further interest or income after death will not be exempt from taxation.

    Thereafter, we will close the ISA and transfer all ISA funds to the person who has Grant of Probate in relation to the deceased ISA Investor’s estate. Your inheritance will be dependent on the deceased ISA Investor’s Will or as applied under law.

    You will not be able to take over the deceased ISA Investor’s ISA or make any further subscriptions to it.

    What is the difference between the Lender Platform Terms and Conditions and the ISA Terms and Conditions?

    The Lender Platform Terms and Conditions govern your membership of the Lending Works Platform, access to and use of the platform, the additional services we provide you and our relationship. This covers both your Classic Account and your ISA.

    The ISA Terms and Conditions govern the Lending Works ISA and our relationship as ISA Manager and ISA Investor. There will be some elements of the Lender Platform Terms and Conditions which will be modified by the ISA Terms and Conditions for your ISA.

    You should read both of these sets of terms and conditions side by side.

    Where will my cash be held?

    All funds in your Lending Works ISA will be held in a segregated client account with a UK bank. This is currently NatWest Bank Plc.

    I have heard about “flexible ISAs”. Is the Lending Works ISA a flexible ISA?

    The flexible ISA was introduced on 6 April 2016. However, it is not mandatory and we think this is most relevant for cash ISAs, where you might need instant access to your funds (which may be returned to your ISA later), rather than for peer-to-peer lending which is intended as a longer-term investment option. With that in mind, we will not be offering the Lending Works ISA as a “flexible ISA”.

    What if I move abroad?

    If you move abroad in any tax year, you can still keep your Lending Works ISA open, however, you will not be able to add any new funds to your Lending Works ISA or transfer funds to Lending Works from another ISA Manager, until you return to the UK. Any new funds you have subscribed in the tax year in which you move abroad may need to be removed from your ISA together with any relevant income, even if you made the subscriptions whilst you were still in the UK.  You may also need to skip an entire tax year before you are able to subscribe new funds to any ISA again.  

    You must let us know immediately if in any tax year, you have been or will be out of the UK for more than 182 days so that we can determine if you are deemed to be “non-resident”. The period outside the UK does not need to be constant but calculated as a total number of days over the tax year.

    What happens if I am made bankrupt?

    If you are made bankrupt, you must let us know immediately and provide us with a copy of the bankruptcy order made by the court. Often we will receive this directly from the court or Official Receiver but you should always let us know by contacting our Customer Service team.

    Depending on what the court order says, we may suspend your ISA and not allow you to access this or carry out any actions. You may not lose any tax benefits you have already received, but going forward the funds in your ISA may be owed to the Official Receiver and Trustee in Bankruptcy and accordingly we will need to take instructions from them as to how to manage your ISA. This will also impact your Classic Account. Your membership of the Lending Works Platform may also need to be terminated.

    We understand this may be a difficult time for you but we must comply with all relevant insolvency legislation.

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