This is a good question.
Just like any other type of ISA, the charges for opening an IFISA account also vary from provider to provider. All Innovative Finance ISA providers have their unique requirements. Generally, opening an IFISA account can cost you between £1 and £1,000. Every firm has its policies and charges, so ask the firm you are interested in working with to see if they are affordable for your budget.
How risky are Innovative Finance ISAs?
No type of investment is risk-free. Making money, in general, is a risky business. However, to some IFISA may seem equally or riskier than stocks & shares ISA, it is not as unstable. This is because IFISA providers promise investors fixed returns, and they specifically are more consistent and predictable. However, Innovative Finance ISA also carries the double risk of the investment itself, and the capability of the business provides it. While for some IFISA provision might be a means to grow passive income. These accounts are a sure way to create a diverse investment portfolio by investing in a variety of investment classes.
Can I open an ISA account on behalf of somebody else?
No, you cannot open an ISA account for someone else.
Do I have any personal savings allowance (PSA) tax-free outside of an IFISA?
Yes, you are entitled to a PSA. If you are basic-rate taxpayers, then you can earn tax-free interest of up to £1,000, and if you are high-rate taxpayers, then you can earn £500 tax-free per year across your savings, deposit accounts and investments. If you aren’t sure about the amount of savings you can have tax-free, then you can talk to an independent financial advisor or your accountant.
How an Innovative Finance ISA Can Help You Avoid Tax
Innovative Finance ISA has become quite popular among savers as it offers a tax break when you invest through peer to peer lending. IFISA was introduced in April 2016 by the UK government as an alternative to traditional saving methods. This was introduced to encourage people to grow savings by lending spare cash to individuals and businesses. It offers borrowers another choice to borrow loan other than a bank. Many peer to peer lending platforms offer Innovative Finance ISA. However, if you don’t know about them, then you wouldn’t know how these can be a tax saving option.
What can you invest in an IFISA?
The primary investment is made into peer to peer lending. Investors can invest their funds in an online p2p platform that matches borrowers with lenders. As these platforms benefit from cheap costs by running an online business, the returns are higher as well.