A Huge Boost for the Crowdfunding Movement
The Innovative Finance ISA, or IFISA, is one of the latest developments from the investment world. The IFISA is focused on P2P (Peer-to-Peer) lending and could be a real boost to those who have been experiencing low interest amounts on their ISAs since the beginning of the recession. The introduction of the IFISA is predicted to fuel the existing interest in P2P lending which has grown in popularity over the past few years.
This article will cover the finer details of the new IFISA and also look into what an ISA is and how it can be of benefit to savers
The term ISA is short for Individual Savings Account. It is essentially an account where the saver does not have to pay tax on the interest that they earn on the money they have deposited in the account. Although this sounds great, there are several restrictions and guidelines placed upon these accounts.
First of all, every financial year, a saver is only allowed to deposit up to £15,240 into their ISA. However, this allowance can be built up over the years. It is not considered to be an extremely restrictive amount by those who save in this way. Additionally, a saver can have more than one ISA and it is possible to transfer funds between accounts.
It is important to remember that when you make a withdrawal from your account, you will no longer be eligible for the allowance or tax relief of that year. The idea is to put money into your account and keep it there to grow. Once you withdraw money from the account this amount can not be replaced. Although ISAs are already a popular concept, many people have only invested small amounts of money in them.
This is often because they want to test how it can help them to grow their money. Before the introduction of the IFISA there were only two different types of ISA. One is a cash ISA and the other is a stocks and shares ISA. With a cash ISA you place the money in the account and leave it to accrue interest. With a stocks and shares ISA you use your money to invest in shares, bonds and funds of various companies.
You have the option to sell your investments on the stocks and shares market if you need to access your money. Plans for the IFISA were announced in the summer of last year and have been labelled a positive development for P2P lenders. Many crowdfunding platforms have already made adjustments for new and existing customers to set up an IFISA on their websites.
The accounts will be available from the 6th of April this year. When the new ISAs do come into effect, savers will be able to spread the £15,240 allowance across the three various ISA types. The amount placed in each is completely at the discretion of the saver. Existing platforms that offer P2P lending will now be able to act as ISA providers.
The same general principles of having an ISA are applicable to the IFISA, with certain new guidelines being introduced by the government. These new guidelines were created with P2P lending in mind. When a saver wishes to access funds from their ISA, the ISA provider will provide this within 30 days of a formal request being made. This is true of both a cash ISA and a stocks and shares ISA.
With the new IFISA, the investment must first be converted into cash before it can be withdrawn by the saver. This is done by selling the amount to a new investor. There is no specified time for how long this should take.
This is peer to peer lending and your investment is at risk. We encourage investors to diversify their portfolio and to review all investments to ensure that they meet with their own investment criteria.