Innovative Finance ISA: The force to awaken P2P lending

Open your ISA

In the space of a year, peer-to-peer lending (P2P) has rocketed to a galaxy far, far away from where it once was. The total industry value stands at around £3 billion within the UK now, and it’s very much on the rise. But while some may think our sector has been a bit Wookiee to get to where we are, we prefer to Luke at the facts. For too long, banks and building societies have been offering derisory rates of return on savings and ISAs, and, coupled with the instability in local and global stock markets, it’s created a large vacuum for a new kind of investment with consumers looking in Alderaan places to grow their money.

Peer-to-peer lending platforms may have come from the dark side, but more and more troopers are cottoning onto the benefits it has to offer, and the banks just aren’t able to strike back. That’s not to say that the institution of the bank as we know it will become a Fader, but a new alternative like P2P lending has given consumers plenty to Chewbacca on.

But the mighty force of peer-to-peer lending really is set to awaken in April, when the new Innovative Finance ISA (IFISA) goes live. We’re still in the Darth about a few things under consultation with HM Treasury in terms of how it will be implemented, but here is what we do know right now:

  • IFISAs will be available through FCA regulated platforms from 6th April 2016
  • Investors will be able to shield interest on P2P loans within their IFISA from tax
  • Pre-existing P2P loans are unlikely to be transferrable; however existing cash and stocks & shares ISAs will be transferrable
  • Experts predict that the sector could swell to £50 billion by 2018 as a result of IFISA
  • You will only be allowed to hold one IFISA in each tax year
  • At this stage, only P2P lending is eligible for the IFISA
  • The launch date for IFISA will coincide with that of the Personal Savings Allowance, within which peer-to-peer lending will be included

We’re now less than 100 days away from this momentous day, and the excitement we’re feeling is (An)akin to a child in a sweet shop. We’ll be making further announcements regarding the Innovative Finance ISA in the New Year, but, as ever, if you want to stay abreast of developments and receive regular updates, you can throw your Hutt into the ring by leaving your email address with us here.

But whichever way these final details are ironed out, the important thing to note is that consumers stand to benefit as investing through P2P will become even more lucrative. So don’t be the Obi-Wan to miss out!

Anyway, enough jibba Jabba for now. We hope you have a wonderful and prosperous New Year, but until then, from us, it’s a wrap!

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Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.

As with all investments, your capital is at risk.