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Sep 2020

What is a Peer to Peer ISA?

What is a Peer to Peer ISA?

A Peer to Peer ISA sounds complicated – but to the experienced and keen investor, it can be a great way to diversify your portfolio, try a new, innovative form of investing, while benefiting from the tax benefits associated with an ISA account. But what exactly is a Peer to Peer ISA, and which ones should you be looking at? 

What is an Peer to Peer ISA?

Also known as an Innovative ISA, a Peer to Peer ISA is makes use of the ISA platform by using peer to peer lending (P2P). 

This does what it says on the tin: a peer can lend to a peer.

In these types of ISAs, savers are able to choose to lend their money to a borrower directly rather than going through a middle man – this cuts out stages to the process and also means that the lender (in this case, maybe you) can benefit from a better interest return on their investment.

There is a fairly big range of different platforms which offer Innovative or Peer to Peer Lending; this means whether you are looking to lend your money to others and enjoy the returns, or looking to borrow money through this platform, there is a lot of choice.

How does it work?

Like any ISA, this allows investors to gain returns on their investments which are protected from the taxman because it is within the ISA wrapper; the UK government allows every British adult to put up to £20,000 each year into an ISA or ISAs, the returns of which will be safe from capital gains tax.

This type of ISA are typically available online, and allow you as an investor to put your money into various types of funds of which borrowers can seek various types of loans (e.g. personal, business, property). 

Your money will then be lent to individuals and ideally generate returns.

In order to get a Peer to Peer ISA you have to be…

  • Over the age of 18
  • A resident of the UK
  • A UK taxpayer

What are the risks?

This is a more risky form of investment when it comes to ISAs so it suits a more experienced investor who also has a fairly good tolerance for risk.

The risk with any investment is that you could theoretically get less money back than the amount that you put in. 

But with Peer to Peer lending, this is slightly riskier – especially as this kind of investing is not currently under the protection of the Financial Services Compensation Scheme (FSCS). 

It is, however, regulated by the Financial Conduct Authority. 

Read more about Peer to Peer ISAs here.

Peer to Peer Lending ISAs

Classic Innovative Finance ISA (IFISA)

from easyMoney

ISA Option
Allows ISA Transfers
Interest Rate 3.67% annualised target return
  • Term: No Fixed Term
  • Invest From: £100

Why we like it: Invest up to £20,000 this tax year 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 at over 1,000 of Britain’s biggest retailers and more! e-Money Capital Ltd trading as easyMoney is authorised and regulated by the FCA (FRN 231680). 

Important: Peer to peer lending is not covered by the FSCS. Returns are not guaranteed and your actual returns may vary. Capital is at risk

  • TAX-FREE Innovative Finance ISA
  • Minimum investment of £100
  • Secured by UK property
  • Maximum 75% loan to value
  • Buffer of 25% should the value of a property fall
  • Invest over £1,000 and you will automatically become an easyMoney plus card member, offering savings at over 1.000 of Britain’s biggest retailers
  • Also accepts ISA transfers from previous year's ISA's
  • Interest paid monthly
  • No fixed term, hold for as long as you wish
  • Can also be held outside of an ISA
  • 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)
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.

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