skip to main content
15th
Aug 2018
/

Peer To Peer ISA – 5 Ideas For Your 2018/19 ISA

Peer To Peer ISA – 5 Ideas For Your 2018/19 ISA

Savings accounts and cash ISAs are struggling to stay ahead of inflation this year. With your annual ISA investment limit raised to £20,000 last year, this may be the time you want to look at a new type of ISA which offers around double the yield of a Cash ISA (with an increased risk, naturally). 

What is peer-to-peer investment?

You may be more familiar with it as internet-based crowd-funding. At its simplest it’s a form of lending that cuts out the middleman (that is to say, banks) and connects lenders directly to small, innovative businesses that need funding, allowing borrowers to pay less interest but also giving higher returns to investors.

The UK government stepped into the peer-to-peer lending space as a lender at the end of 2012, making some direct loans to innovative SMEs. In April 2016 the government launched the Innovative Finance ISA, to encourage individual investors to get into peer-to-peer funding with the added tax-free advantage of an ISA wrapper.

Effectively, you are able to invest in a business by buying some of its debt in “crowdfunding debentures”: similar to a bond, paying fixed interest over a period of time, and you’re not charged tax on the interest you earn.

The scope of the Innovative Finance ISA covers peer-to-peer lending platforms, such as the examples we show below, but it doesn’t extend to equity-based investing.

How much can you invest?

As much as you like, but only the first £20,000 per year will be eligible to sit inside your Innovative Finance ISA.

You can split your £20,000 allowance across various different types of ISA (Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, etc), but the combined amount invested during the tax year must not exceed your personal limit.

You’re only allowed to hold one Innovative Finance ISA account each tax year. But you will be able to open a new Innovative Finance ISA with a different P2P platform each tax year.

Who can invest in an IFISA?

Any UK taxpayer aged 18 or over.

Unlike with Cash ISAs, there are no immediate plans from the government to introduce a Junior Innovative Finance ISA for under-18s.

Pros and cons of an IFISA?

  • The big plus is the more attractive return.
  • But peer-to-peer lending is a more adventurous type of investment, and these kinds of loans are not without risk. You don’t want to just be comparing interest rates on a like-for-like basis against bank or building society Cash ISA accounts.
  • Unlike a UK bank or building society account, peer-to-peer lending is not currently protected by the Financial Services Compensation Scheme (FSCS).
  • What that means is that individual P2P lending platforms have different discretionary arrangements for protecting investors’ money, but their reserve funds are not regulated and the platform’s ability to cover all defaulted loans is not guaranteed.

5 to look at

British Pearl


Their IFSA offers easy access to the UK property market: you become a mortgage lender, secured by first charge on British property.

Terms: 2-5 years

Invest from: £100

Earn: 4.4% fixed interest

Limited offer: an extra 2% on shares and 1% on loans in Year 1

Crowd2fund


Feels like crowdfunding, allowing you to choose the businesses you invest in. You can start very small, and make monthly additions to your investment.

Term: 1-5 years

Invest from: £10

Earn: estimated 8.7% APR

Easymoney


If you like the brand you could feel comfortable here, and the easyMoney bonus card gives you savings of up to 55% at more than 100 British retailers.

Term: no fixed term

Invest from: £10,000

Earn: target 7.28% annualised return

Lendingcrowd


Automatically diversifies your funds across at least 20 loans in their Loan Market, with no more than 5% of your funds in any one loan.

Term: no fixed term

Invest from: £1,000

Earn: target 6% return

Summer offer: up to £400 cashback if you invest before 31 August 2018

Ratesetter


The option of a Rolling, 1-year or 5-year term is useful. For the Rolling and 1-year terms capital and interest is repaid at the end of the term you’ve opted for. With the 5-year term interest is repaid when the loans are repaid.

Term: Rolling, 1 year or 5 years

Invest from: £10

Earn: up to 5.2% annualised expected return

New investor offer: £100 bonus when you invest £1,000+ for a year. 

Peer to Peer Lending ISAs

IF ISA (innovative Finance ISA)

from British Pearl

ISA Option
Allows ISA Transfers
Interest Rate Up to 4.40% fixed interest
  • Term: 2 to 5 Years
  • Invest From: £100

Why we like it: Limited offer get +1% on £2k-£20k. British Pearl offers easy access to UK property market returns or the opportunity to earn like a bank by being a mortgage lender. Monthly interest income. Secured by first charge over UK property. ISA eligible for tax free returns. Fully flexible/allow ISA transfers in. British Pearl is FCA authorised

  • Innovative Finance ISA - tax free returns
  • Fixed interest rate up to 4.40% p.a.
  • Monthly interest income
  • Secured by first charge over UK property
  • Fully flexible/allow ISA transfers in
  • British Pearl is FCA authorised
  • Capital at risk
  • Must be aged 18 or older
  • The value of your investment can go down as well as up and historic performance is not a guide for future performance
  • Share & Loan investments are not covered by the FSCS

Calculate your interest with this plan

Your savings:
£
You could gain:
£0.00 (per tax year)

Peer to Peer Growth IFISA

from Lending Crowd

ISA Option
Allows ISA Transfers
Interest Rate 6.00% target return
  • Term: No Fixed Term
  • Invest From: £1000

Why we like it: Innovative Finance ISAs (IFISA) are the new way to invest tax-free. Just like Cash and Stocks & Shares ISAs, you can invest up to £20,000 each tax year, and you don’t need to pay any personal taxes on your earnings. Lending Crowd will automatically diversify your funds across at least 20 loans through their Loan Market, with no more than 5% of your funds invested in any one loan. All repayments will be automatically reinvested.

  • No income tax or capital gains tax to pay on your profits
  • No fixed term, hold for as long as you wish
  • Also accepts ISA transfers from previous year's ISA's
  • Investments are automatically diversified across multiple business loans
  • The target rate is variable, net of ongoing management fees, estimated bad debt and before the 1% withdrawal fee
  • Capital is at risk
  • Must be aged 18 or older
  • Peer to peer lending is not covered by the FSCS

Calculate your interest with this plan

Your savings:
£
You could gain:
£0.00 (per tax year)

Balanced Innovative Finance ISA (IFISA)

from easyMoney

ISA Option
Allows ISA Transfers
Interest Rate 7.28% annualised target return
  • Term: No Fixed Term
  • Invest From: £10000

Why we like it: Invest up to £20,000 this tax year (2018/19) and/or transfer in from an existing Cash ISA, Stocks & Shares ISA or IFISA. When you join the easyMoney family you will automatically become an easyMoney plus card member, offering savings up to 55% at over 100 of Britain’s biggest retailers and more! e-Money Capital Ltd trading as easyMoney is authorised and regulated by the FCA (FRN 231680). As with all investing, your capital is at risk when you lend to businesses and returns are not guaranteed. No FSCS. For more details please refer to our full risk statement.

  • 7.28% TAX-FREE through the Balanced Innovative Finance ISA
  • Minimum investment of £10,000
  • Secured by UK property
  • Maximum 75% loan to value
  • Buffer of 25% should the value of a property fall
  • You will automatically become an easyMoney plus card member, offering savings up to 55% at over 100 of Britain’s biggest retailers and more!
  • Also accepts ISA transfers from previous year's ISA's
  • As with all investing your capital is at risk when you lend to businesses. easyMoney reduces this risk by taking security over property
  • Returns are not guaranteed and your actual returns may vary
  • Capital is at risk
  • Must be aged 18 or older
  • Peer to peer lending is not covered by the FSCS

Calculate your interest with this plan

Your savings:
£
You could gain:
£0.00 (per tax year)

Peer to Peer IF ISA

from RateSetter

ISA Option
Allows ISA Transfers
Interest Rate Up to 5.20% annualised expected return
  • Term: Easy Access, 1 Year or 5 Years
  • Invest From: £10

Why we like it: New investor offer: £100 bonus when you invest £1,000+ for a year. Ts & Cs apply. Peer to Peer IF ISA tax free investment. Capital and interest is only paid at the end of loan term in 2 out of the 3 markets – in the 5 year the interest is repaid in line with the investment repayment. Access your money early if funds available in market to replace withdrawal. Provision fund provides buffer against credit losses (not a guarantee). Peer to peer lending is not covered by the FSCS. Capital at risk.

  • Innovative Finance ISA - all earnings are tax free
  • Choice of three markets: Rolling, 1 Year or 5 Year
  • Annualised average target return of between 2.8% and 5.20%
  • Capital and interest is only paid at the end of loan term in 2 out of the 3 markets – in the 5 year the interest is repaid in line with the investment repayment
  • Access your money early if funds available in market to replace withdrawal
  • Provision fund provides buffer against credit losses
  • Must be aged 18 or older
  • RateSetter IF ISA is an investment, not a deposit account
  • Provision fund is not a guarantee
  • Peer to peer lending is not covered by the FSCS

Calculate your interest with this plan

Your savings:
£
You could gain:
£0.00 (per tax year)
Important Risk Information:

The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website aims to provide information to help you make your own informed decisions. It does not provide personal advice based on your circumstances. If you are unsure of how suitable an investment is for you, please seek personal advice.

High Income ISAs

High income ISA ideas:

ISAs Products

Cash ISAs

Fixed Rate & Instant Access ISAs:

Cash ISAs: 

Stocks & Shares ISAs

Types of Stocks and Shares ISA include: 

Stocks and Shares ISAs

Latest News

A New “Care ISA” To Fund Care Home Costs?

21st August 2018

For anyone around retirement age, paying for our care costs when we get older is a worry that probably ranks second only after a fear of developing dementia. Will a new type of ISA be the solution?

Newsletter Signup

Sign up to our Newsletter to get exclusive news and offers direct to your inbox.

About us

ISA.co.uk is a trading style of Fair Investment Company.

We've been comparing and recommending ISAs for many years so you can trust you're in good hands.

About us

4.89 Average

36 Reviews

Jen

I found the way the different options are presented very clear - much more useful than some other comparison sites. I sent it to my daughter as well.

Paul

Very informative, find myself a good ISA account with best return in terms of interest.

Anonymous

Easy to navigate, all required information was to hand. Professional looking site!

Jessica Esa

ISA.co.uk has a really attractive and simplistic design. I've found it easier to use than other similar comparison sites. The products are simply described, it's informative and the pros and cons are really clear. Great website.

Sue

Easy to use website and up to date. Saved the link on my tablet.

Rob Holden

The website was very useful and informative.

Andrew Johnson

ISA can be confusing at first and this site includes a useful and helpful introduction into the world of ISAs

Crowd2Fund

Excellent website - clear and helpful information about different products - and a trustworthy partner.

Anonymous

Quick and professional service provided

Anonymous

Very insightful and easy to navigate.. would recommend to anyone interested

Helen Belcher

Clear concise information that was easy to understand!

Sue

Easy to use website and up to date. Saved the link on my tablet.

Adam

simple, informative and clear - found what I was looking for straight away. Thank you.

Steve

Really simple to use and all the information was clear with lots of products available. The interest calculator was really handy too. Have bookmarked and will definitely use again.

Marion

Very helpful site for my investment isa

Hannah Gordon

This was a really user-friendly site, and was very helpful when it came to comparing accounts and choosing my 2016 ISA.

Sue

Easy to use website and up to date. Saved the link on my tablet.

Anonymous

If you wish to invest in an ISA this site has it all. A super comprehensive range of simply explained products from all the major companies.

Cristina Iacob

Very knowledgeble company with an extensive range of services, a great website with loads of useful information.

Jessica Morley

Really informative and easy to use site. Information is laid out very clearly and comparisons have all the plus & minuses I'm interested in, so makes me feel like I am making an informed decision. There was also a lot of additional information which would be incredibly helpful to someone completely new to ISAs who wanted to read up on the basics.

Sam H

excellent website, helped me to understand how i can get started with ISA's and helped me to narrow down great deals!