Innovative Finance ISA

Innovative Finance ISA or IFISA was launched in 2016. The UK government launched this after recognising the popularity and growing demand of alternative types of investments. This type of savings account allows you to invest in peer to peer lending. All investor, whether experienced or beginner, can access IFISA and enjoy returns at a high-interest rate. Before people only knew about traditional ISA (Individual Savings Account) which allows individuals to save tax-free funds up to £20,000 for 2020/21 per tax year. The ISA allowance generally remains the same. Hence it provides a good opportunity to grow funds without having to pay taxes. In the past, there were only two ISA types available for investors, including cash ISA and stocks & shares ISA. With cash ISA the interest rate is only good for the first year, and then investors have to change providers to get good interest rates. Innovative Finance ISA is a new type of ISA which allows individuals to put their p2p investment in a tax-free scheme. It allows individuals to invest their annual ISA allowance into IFISA. Investors can also transfer their funds of previous tax year from other types of ISAs into this new form of savings account. The biggest attraction from investors is that they can get high-interest rates, usually ranging from 4% to 6% through peer to peer than they would with cash ISA. A lot of providers split investor’s funds automatically to spread across different loans. This way, the risk of losing all funds is reduced if one borrower defaults on their loan repayment. For instance, if you invest £1,000 in p2p, it may be split into chunks of £10 across a hundred different loans, diversifying investment instantly. Unlike other investments, Innovative Finance ISA is not protected by the Financial Services Compensation Scheme (FSCS). However, the majority of providers have a reserve fund set up to cover any loss, so if one borrower defaults the investor will still get their original funds back. To understand everything about IFISA investments visit our website : https://medium.com/@matt.jonnes010/innovative-finance-isa-a406b1cfc1cc

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