Zopa update on the Innovative Finance ISA

The Innovative Finance ISA – or IF ISA – will be introduced on 6th April 2016; Zopa has revealed how its IF ISA is going to work

Zopa update on the Innovative Finance ISA

From 6 April peer-to-peer lending platforms with a full FCA licence will be able to offer customers a new type of ISA, the Innovative Finance ISA, allowing customers to earn tax-free interest on all loans which are purchased within an IF ISA wrapper.

It is claimed that IF ISA rates of return are likely to be higher than a typical Cash ISA but that is a reflection of the level of risk. It is important to remember that, as peer-to-peer lenders are not banks, your capital is at risk and investments are not covered by the Financial Services Compensation Scheme.

From 6th April 2016, you’ll be able to fund up to three ISAs for the new tax year – one of each type, up to a combined amount that is within the new annual limit of £15,240. As long as you don’t close your ISA, you can carry forward your tax-free savings balance each year and earn tax-free interest on even more of your money

Zopa’s Innovative Finance ISA

Zopa has announced it will be offering customers the same rates on the IF ISA as it does on its standard products. Zopa’s IF ISA will also be flexible. Flexible ISAs are a new ISA feature also being introduced on 6 April 2016. They will allow customers to withdraw funds from an ISA subscription without impacting the annual limit.

For example: if you invest £15,240 and withdraw £5,000 from a flexible IF ISA, you could then put another £5,000 in at a later date within the same tax year, which would still earn tax-free interest.

For consumers that have been building up their tax free savings allowance over the years, they will be able to transfer all or part of those balances over to an Innovative Finance ISA with Zopa.

Andrew Lawson, chief product officer at Zopa, said: “We anticipate a lot of interest in Zopa’s Innovative Finance ISA when it launches from April. Many of our customers have long expressed an interest and desire to put their peer-to-peer lending into an ISA and enjoy the tax benefits. We also expect that the IF ISA will be further catalyst for driving awareness of the P2P sector, and help more UK consumers earn more interest from their money.”

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