ISAs and the Innovative Finance ISAs

While ISAs (Individual Savings Accounts) have long had a reputation of being complicated, the principle behind them is actually quite simple: they’re savings or investments accounts that you never pay tax on.

In fact, up to £20,000 can be saved each tax year in any one or a combination of these accounts, as of 2018/19.

So, what types of ISA are available?

You can take your pick between various types of ISA, including Help-to-Buy ISAs for first-time house buyers, and Junior ISAs that provide a tax-efficient means of building up savings for a child. The latter, for instance, can be opened for any child under 18 living in the UK, with the money able to be held in cash and/or invested in stocks and shares.

Indeed, when it comes to broad ISA types, much of the conversation tends to focus on Cash ISAs and Stocks and Shares ISAs. As to which of these types of ISA might represent the best choice for you, much will depend on such factors as your circumstances and attitude to risk.

A Cash ISA, for instance, represents a solid and reliable option given that such an account guarantees you’ll get back all of the money you put in. Interest rates are currently at historic lows, though, so inflation might erode the value of your savings over time.

By contrast, stocks and shares have historically often provided better returns. However, the money you invest in them is liable to rise and fall in line with the present state of the financial markets, making a Stocks and Shares ISA a more volatile option.

The Innovative Finance ISA, though, has been attracting a lot of fuss lately
Innovative Finance ISAs are sometimes referred to as IFISAs, with the idea behind them being that they contain peer-to-peer (P2P) loans instead of cash or stocks and shares.

P2P lending, by the way, entails lending your money to borrowers and businesses that then pay back the borrowed amount with interest.

Given that an IFISA cuts out a bank altogether due to you investing your money through an online portal known as a P2P lender, you can expect to earn higher rates of interest than a traditional savings account would make possible.

P2P lenders have been permitted to allow tax-free ISA accounts since April 2016. So while IFISAs are a relatively recent addition to the world of ISAs, you shouldn’t overlook them as an investment option now or in the years to come.

To discuss whether an Innovative Finance ISA or any other type of ISA could be the right choice for your own circumstances and ambitions in 2019, simply give the HE Global Investments team a call today on 0207 096 0125 or email


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