Innovative Finance ISAs are investments that give consumers the opportunity to earn tax-free returns through a Peer to Peer lending platform. IF-ISAs are among the newer types of ISA, having first been introduced to the public in 2016. 

We asked the Investor Relations team at Kuflink to answer some of the most frequently asked questions about IF-ISAs from those who are contemplating making them a part of their investment strategy.

How do Innovative Finance ISAs work?

IF-ISAs are a tax-free investment opportunity provided by easy-to-use Peer to Peer lending platforms that pair up willing lenders (or investors) with individual and business borrowers. Keep in mind that with IF-ISAs, your capital is at risk and they do not come with FSCS protection. To learn more, have a look at this helpful Beginner’s Guide to IF-ISAs.

How many IF-ISAs can I have?

It’s possible to have multiple ISAs, but you are only allowed to open one new IF-ISA with a single provider per tax year.

You’re also able to spread your investments across multiple ISA types, but there is a £20,000 overall investment limit, which is still in place as of the budget speech for 2020/2021.

Is it possible for my ISA allowance (IF-ISA and others) to carry over?

No, it isn’t. Annual thresholds run from the start of the tax year (6 April) through to its end 12 months later (midnight on 5 April). If you don’t use your full allowance during the time, you won’t be able to carry the difference over to the new tax year. The allowance resets on the first day of the new tax year for everyone.

Can I transfer my existing IF-ISA to a new one?

Yes, you can. Contributions from previous years don’t count towards your allowance for the tax year, but subscriptions from the current tax year must be transferred in full.

What happens to my IF-ISA if I move abroad?

It’s possible to retain your existing IF-ISA if you move abroad, although you won’t be able to open any new accounts, or make new contributions to any types of ISAs. UK residency is required to open an IF-ISA, with the only exception being if you or your spouse are a Crown employee, diplomat or civil servant and if your duties are deemed as being performed in the UK.

What happens to my IF-ISA if I die?

In the unfortunate case of your death, your spouse/civil partner can ‘inherit’ your tax benefits. This gives them the opportunity to receive an additional permitted subscription allowance, equal to the amount that currently exists in your IF-ISA or other ISAs. For example, if you have £15,000 invested into an IF-ISA at the time of your death, your partner becomes eligible for the standard allowance of £20,000 plus the £15,000 they inherited from you.

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Starting a Journey with IF-ISAs

IF-ISAs allow investors to make the most of their investments by allowing them to earn tax-free returns. Britain is now estimated to have over a thousand ISA millionaires, showing that the right product, coupled with discipline and patience, can take you a long way in your investment strategy. 

With the right Peer to Peer provider, achieving your investment goals can be a reality, rather than a pipe dream. Now that you know the answers to the most frequently asked questions about IF-ISAs, you’re ready to start the journey to get there.

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