As you may well have heard, the Innovate Finance ISA (IFISA) is due to launch in April this year and Landbay will be offering IFISAs to our investors soon afterwards.
Some of you have had questions about our IFISA, so we’ve put them together in this post. As always, if there’s anything we’ve missed please don’t hesitate to drop us a line at firstname.lastname@example.org
What is an IFISA?
As George Osborne announced in July 2015, the IFISA is a tax-free ‘wrapper’ for peer-to-peer investments. Along with the traditional cash ISA and the stocks & shares ISA, you will now be able to earn tax-free interest on your Landbay investment.
While one year cash ISAs offer average interest rates of 1.38% (Nov. 2015) and Financial Services Compensation Scheme (FSCS) coverage, stocks and shares investments tend to be more volatile with higher returns but higher risk. Depending on the platform you choose, the IFISA sits somewhere in the middle of the two, but unlike the cash ISA, IFISA deposits are not covered by the FSCS.
How much can I put in my Landbay IFISA?
Just like any other ISA, you can put up to £15,240 in your IFISA this year. You can also split your ISA allowance across your IFISA, a Cash ISA and a Stocks & Shares ISA; for example with a third in each.
What rates can I get in my Landbay IFISA?
We plan to launch our IFISA with our Tracker Rate product: 4.0% annualised. Your rate of interest is 3.35% pa above LIBOR* (London Interbank Offered Rate). When LIBOR changes, your Tracker Rate changes too.
Please see more information about our rates here. Just like the existing investment products and all other peer-to-peer investments these are not covered by the FSCS.
How can I set up my IFISA?
As soon as we are ready to launch our IFISA we will let all our investors know and provide you with details of how to do this.
Can I split my IFISA investment over multiple peer-to-peer platforms?
Not at the moment, unfortunately. But this is something we are continuing to discuss with HMT and we will let you know if/when the ISA rules change.
Can I transfer my existing Cash or Stocks & Shares ISA funds into my IFISA?
Yes. You can transfer unlimited funds from pre-existing Cash or Stocks & Shares ISAs into IFISAs (ie ISAs set up prior to April 2016). Contrary to the previous point regarding setting up your IFISA with new funds in just one platform, these ‘old’ ISA funds can be put into different peer-to-peer platforms.
Which platforms are eligible for IFISAs and when can I get mine?
Currently, no platforms are eligible until 6th April. When that day arrives, only platforms who have gained full FCA authorisation will be able to offer IFISAs to their investors. Just like the rest of the P2PFA members and many others, we are currently working hard with the FCA to get our full permissions in time for the IFISA launch date but we cannot confirm our launch date until the application has been fully processed.
Equity crowdfunding investments may also be included in the IFISA space at some stage, but for now it’s just peer-to-peer.
What is a Personal Savings Allowance (PSA)?
Also launching in April, the PSA will allow every basic rate tax payer to earn tax-free interest of £1000, meaning that 95% of the UK won’t pay tax on savings (source: Money Supermarket).
However, this will depend on your individual circumstances – for example higher rate tax payers are only eligible for a £500 PSA and additional rate tax payers are not eligible for a PSA.
What does ‘tax free’ mean?
This means that you don’t have to pay UK Income Tax on you’re the interest earned from your investments. As above, this will depend on your individual circumstances. If you are unsure about how much tax-free investment you can have, you should speak to an independent financial advisor.
*3-Month LIBOR, repriced on a quarterly basis. Last repriced on 15th December 2015 at 0.59%pa. Total rate is 3.94% pa. 4% rate is annualised and applies when your monthly interest is reinvested over a 12 month period.
The information contained in this article should not be used by consumers to make financial decisions. Consumers have a range of different financial needs and requirements and as such should always seek independent professional financial advice before making an investment decision.