Individual Savings Accounts (ISAs), allow you to save up to £20,000 per year (as at 2019/20) tax-free.

There is a range of different ISAs you can choose from – so be sure you understand their unique features before you decide which one best suits your requirements.

You can split the £20,000 allowance between ISAs to spread your funds over a range of investment opportunities. It is worth assessing them all as if you don’t use your £20,000 allowance it will not roll over to the following year.

Read on for an overview of the main types of ISA.

Cash ISA

Cash ISAs are available to UK residents, aged 16 or over, and allow contributions of up to £20,000 per tax year (2019/20).

You can choose either an easy access or fixed-term account, which typically impacts the rate of return based on the length of commitment. Cash ISAs are FSCS protected, meaning you’re covered up to £85,000 of savings per individual, per financial institution.

Stocks and Shares ISA

A stocks & shares ISA is a tax-efficient investment account that lets you put money into a range of different investments, while offering the possibility of higher returns than cash ISAs, but only if you’re happy to take capital risk.

The range of investments can include individual shares, investment funds, trusts and government bonds or corporate bonds.

Innovative Finance ISA

Innovative Finance ISAs (IF-ISAs) are investments that allow consumers to lend and earn tax-free interest through a Peer to Peer lending platform. Innovative Finance ISAs pair up willing lenders (or investors) with individual and business borrowers through an easy-to-use online platform.

With an IF-ISA, you are loaning your money directly to borrowers across a range of project types in different industries. Each IF-ISA providers’ offering will differ so ensure you read their product terms before investing.

Kuflink is an example of a Peer to Peer platform where investors have the security of UK property-backed investments*. Our innovative finance ISA offers 1, 3 or 5-year terms, with interest of up to 7% per annum*. Kuflink pays IF-ISA interest annually and does not charge platform or investment fees.

*Capital is at risk and Kuflink is not protected by the FSCS. Past returns should not be used as a guide to future performance. Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed. 

Lifetime ISA

You can use a Lifetime ISA to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA. You can put in up to £4,000 each year until you’re 50.

The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. You can hold cash or stocks and shares in your Lifetime ISA or have a combination of both.

Top Tip: If you choose to pay in the maximum amount of £4,000, this will still leave £16,000 that can be paid into different types of ISA.

Junior ISA

This account allows parents or any other friends or relatives to put up to £4,368 (for the tax year 2019/20) into an ISA for a child aged under 18. There is a choice of either cash or stocks and shares. The latter are riskier but generally outperform cash over the long-term. The allowance can be split between both types of investment.

Once the child reaches 18, a junior ISA automatically turns into a standard ISA and control of the account passes to them.

Any questions? Take a look at our ISA FAQs.

Transferring or moving your ISA

You can transfer Cash, Stocks and Shares ISAs and even IF-ISAs you currently hold with another provider. Previous year’s subscriptions don’t count towards your annual ISA allowance but current year subscriptions must be transferred in whole and will count towards your ISA allowance.

However, you cannot simply take the money out of one ISA to put into another, as your funds will lose their ISA status. You need to arrange a transfer with your ISA provider to ensure that the investments remain within the ISA wrapper.

To find out more about transferring, see here.

Choosing the Right ISA for your Investments

You can split your annual allowance of £20,000 between different types of ISA, allowing you to spread your investments, but how do you choose the right one?

You should first consider what it is you want to achieve, how long you are able to invest your money for and the level of risk you are willing to take.

Do your research, look at the reputation of the providers you are exploring and look at what they offer. Pick the provider that does what you need and want it to do.

Each type of ISA has risks, and you should have a clear understanding of how these investments work, and whether they provide the right opportunity for you. If in doubt, speak to a qualified financial advisor for further information.

If you’d like to talk to one of our Investor Relations team about the Kuflink Innovative Finance ISA, contact us here, and we’ll be happy to help.

Kuflink provides blogs for your general information only.  Blogs do not constitute advice and should not be relied upon by you for making investment decisions. Products and services referred to will not be suitable for all investors and appropriate independent financial advice should always be sought where necessary.

What is an Innovative Finance ISA?

Innovative Finance ISAs (IF-ISAs) are investments that allow consumers to lend and earn tax-free interest through a Peer to Peer lending platform. Innovative Finance ISAs pair up willing lenders (or investors) with individual and business borrowers through an easy-to-use online platform.

With an IF-ISA, you are loaning your money directly to borrowers across a range of project types in different industries. Each IF-ISA providers’ offering will differ so ensure you read their product terms before investing.

Kuflink’s IF-ISA is available to new investors or those wishing to transfer in funds, with the option to invest up to £20,000 per annum tax-free. Choose from 1, 3 or 5-year terms, with interest of up to 7% per annum*. Kuflink’s IF-ISA pays interest annually and does not charge platform or investment fees.

* Capital is at risk and Kuflink is not protected by the FSCS. Past returns should not be used as a guide to future performance. Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed. Tax rules apply to IF ISAs and SIPPs and may be subject to change. Kuflink does not offer any financial or tax advice in relation to the investment opportunities that it promotes.

How many IF-ISAs can I have?

You can have multiple ISAs, but you are only allowed to open one new IF-ISA with a single provider per tax year. As of the 2019-20 tax year, you are allowed to invest up to £20,000 into an ISA, collectively accounting for Cash, Stocks & Shares, Lifetime, Help to Buy** and Innovative Finance ISAs.

**The Help to Buy ISA closed to new accounts at midnight on 30 November 2019

Can I carry my ISA allowance forward?

No. The annual allowance of £20,000 runs from 6 April one year to midnight on 5 April the following year, meaning that if you don’t use your annual allowance within that period, it will be lost.

What if I exceed my ISA allowance?

If you have accidentally exceeded your ISA allowance or opened an account you are not entitled to; you should not attempt to put your mistake right yourself but report it to HMRC by calling 0300 200 3300.  They will assess your situation and tell you exactly what to do next.

Should you be unaware of your error, HMRC will also check your contributions and accounts at the end of each tax year.  If they find that you have made a mistake, they will contact you and explain the process of how to “repair” your ISA step by step.  Please note that any investments that were made in excess of your allowance will not be eligible for tax exemption.

Can I transfer my IF-ISA?

Yes, you can transfer IF-ISAs. Previous years subscriptions don’t count towards your annual ISA allowance but current year subscriptions must be transferred in whole and will count towards your ISA allowance.

Can I switch my IF-ISA mid-year?

Yes. You can switch during the year but be aware that current years subscriptions must be transferred in whole and will count towards your ISA allowance. Previous years subscriptions will not count towards your annual ISA allowance.

Can I withdraw ISA money?

The point at which you can withdraw funds from an ISA depends on the type of ISA you have, so you will need to check the terms and conditions. Some accounts offer instant access. However, with the Kuflink IF-ISA, you will not be able to withdraw funds early, you will need to wait until the end of your chosen term.

What happens to my IF-ISA if I die?

If you are married, you can leave your ISAs to your spouse or civil partner and they may receive an Additional Permitted Subscription allowance equal to the amount held in your ISA accounts. For example, if you leave £10,000 in ISAs to your spouse, their allowance will increase from the normal £20,000 to £30,000 to encompass the inherited funds.

What happens to my IF-ISA if I move abroad?

If you are a non-UK resident, you will only be able to open an IF-ISA if you or your spouse perform duties of a Crown employee, such as being a member of the UK armed forces, a civil servant or a diplomat. These exceptions only apply if the duties are treated as being performed in the UK.

While it is possible to retain access to existing ISAs when you live in another country, you will be unable to open new accounts or make contributions to existing ISAs.

If you’d like to talk to our Investor Relations team, contact us here, and we’ll be happy to help.

Kuflink provides blogs for your general information only.  Blogs do not constitute advice and should not be relied upon by you for making investment decisions. Products and services referred to will not be suitable for all investors and appropriate independent financial advice should always be sought where necessary.

We’ve just launched a brand-new TV advert where we talk about our Innovative Finance ISA and how it could earn you up to 7% interest pa*.

What is an Innovative Finance ISA?

Innovative Finance ISAs (IF-ISAs) are investments that give consumers the opportunity to lend and earn tax-free interest through a Peer to Peer lending platform. Innovative Finance ISAs pair up willing lenders (or investors) with individual and business borrowers through an easy to-use online platform.

How do IF-ISAs work?

With an IF-ISA, you are loaning your money directly to borrowers across a range of project types in different industries. Each IF-ISA providers’ offering will differ so ensure you read our product terms before investing.

The Kuflink IF-ISA

By opening a Kuflink IF-ISA you can earn up to 7% pa* interest tax-free, with a minimum investment of just £100. You’ll lend to a diverse range of business opportunities all secured against UK property* and, with our easy to use online platform, it only takes a moment to get started.

Can I open multiple IF-ISAs?
You are only allowed to open one new IF-ISA with a single provider per tax year. As of the 2019-20 tax year, you are allowed to invest up to £20,000 into an ISA, collectively accounting for Cash, Stocks & Shares, Lifetime, Help to Buy** and Innovative Finance ISAs.

Talk to us about the Kuflink IF-ISA!

To open your IF-ISA, transfer your existing IF-ISA to Kuflink or if you simply want to discuss the product further, book your call with one of the team here. Alternatively, login to your Kuflink account and visit the IF-ISA page for more details.

*Capital is at risk and Kuflink is not protected by the FSCS. Past returns should not be used as a guide to future performance. Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed. Tax rules apply to IF ISAs and SIPPs and may be subject to change. Kuflink does not offer any financial or tax advice in relation to the investment opportunities that it promotes. Please read our risk statement for full details.

**The Help to Buy ISA closed to new accounts at midnight on 30 November 2019

We spoke to Antonio, our IT apprentice to get his take on apprenticeships and how it has helped him learn and grow within his role at Kuflink.

With peer-to-peer lending reaching nearly £11 billion in the UK in 2018, according to the Peer-to-Peer Finance Association, the industry is going from strength to strength. With savvy consumers researching the best place to grow their money and increasingly choosing peer-to-peer lending, we compare this maturing market with mainstream investment options.

Returns

Peer-to-peer lending platforms are taking advantage of high street lenders’ reduction in willingness to lend and filling the gap by matching borrowers with lenders. By cutting out the banks, loans can be sorted out much faster.

Looking at other options, Prudential’s asset manager, M&G, found that the average annual return on UK investments between 1989 and 2018, adjusted for inflation, was 5.2% for equities, 4.6% for bonds and 0.8% per annum for cash (Morningstar, Inc., and M&G as at 30.11.14).

According to MoneyFacts, the average easy-access savings account offers just 0.52% per annum.

Peer-to-peer platforms allow lenders to choose which projects they would like to invest in, allowing them to make informed decisions and select options to suit their requirements and interests. Some lenders enjoy the feeling that they are helping small businesses for example, who may otherwise be unable to access affordable funding.

Alternatively, platforms often offer their own investment package, meaning that the lender does not have to be involved in selecting borrowers. This will usually spread the investment over a wide range of borrowing opportunities, reducing risk*. There can even be a higher return when the investor selects their own range of investments*.

Peer-to-peer lenders are now starting to offer Innovative Finance ISAs, known as IFISAs, as part of their range of investment options. Up £20,000 per annum can be invested, with all interest tax-free for the life of the IFISA*.

Volatility

Peer-to-peer borrowers tend to be small business owners, consumers and those wishing to increase their real estate holding. The lending is not therefore directly tied to the stock market, however still suffers from volatility like any lending method.

Lenders can choose the period time over which they want to lend money, preventing quick overreactions to a fluctuating market and contributing to a more stable investment opportunity*.

Stocks and real estate both fluctuate as the market ebbs and flows. While bonds are less variable, they traditionally offer the lowest return.

Security

Peer-to-peer lending platforms carry out credit and background checks on potential borrowers, ruling out those who do not meet the required standard, and often grading those who are selected according to risk level. Lenders can choose the type of borrower they want. As is usual, returns can be higher with an increased risk.

If a borrower defaults on their loan, the platform will chase them for payment. Some platforms ensure that all loans are secured against property and they may also have a fund in place to cover some or all of the default.

However, it should be noted that peer-to-peer investing is not covered by the Financial Services Compensation Scheme (FSCS). This means that in the event of default, some or all of the amount invested could be lost.

Cash and bonds offer high security, backed by the FSCS to the sum of £85,000. Bonds are an alternative to shares, and are paid out before shares in the event of bankruptcy. Money invested in stocks and shares can fluctuate and lose money. The risk is higher if investments in only one company are held.

It is possible to diversify holdings in peer-to-peer lending, choosing a variety of projects to spread the risk.

The most reputable peer-to-peer lenders will have an orderly wind-down policy in place, to prevent chaos in the event that the platform ceases to trade.

Level of investment and access to money

Many peer-to-peer lenders have a minimum investment level of £100, allowing new investors to try their services without having to put in a large sum to start with.

While stocks and shares may also offer a low minimum investment, dealing costs often make it less profitable to start small. Bonds and cash savings accounts allow low start, but with lower returns.

When investing in peer-to-peer loans, there is usually the option to choose the length of time for which you wish to tie up your money. If a loan is repaid early, then the money will be returned to you at that time. If you wish to withdraw your money early, this may be possible if another investor is available to take over the loan part. Money is likely to be tied up until a new investor is found.

Access to money in bonds and savings accounts may be restricted, with loss of income for early withdrawal, while shares can be sold instantly if there is a buyer, subject to dealing fees. Real estate investment ties money up long-term and can be difficult to exit if the market is depressed.

Regulation

Regulations for mainstream investments are well-established. The newer peer-to-peer lending industry has been regulated by the Financial Conduct Authority (FCA) since April 2014. As growth in the sector continues, new FCA rules are set to come into force in December 2019. The FCA aims to ensure that people understand the difference between peer-to-peer lending and ordinary high street savings accounts.

The FCA’s executive director of strategy and competition, Christopher Woolard, said: “These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities.”

In summary

Investment in peer-to-peer lending offers an opportunity for those seeking better rates* and independence from the stock market to diversify their portfolio. While there is a risk that some or all of an investment can be lost with peer-to-peer lending, the risk can be spread to manage this*. By investing an affordable amount in peer-to-peer lending and considering whether, within the chosen platform, the investment has been allocated to enough different projects, risk can be reduced*.

Kuflink offers investors the chance to choose their own investments or, for those who prefer to invest more widely and with less input, an auto-invest option is available, which is regularly updated, fully vetted and selected by experts to maximise potential returns.

Find out more about peer-to-peer lending today.

*Capital is at risk and Kuflink is not protected by the FSCS. Past returns should not be used as a guide to future performance. Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed.

Introduction – Advantages and disadvantages

I am excited to share insights on the advantages and disadvantages of investing in online P2P platforms. Peer-to-peer lending has experienced remarkable growth in the UK, attracting a diverse range of investors seeking lucrative returns. However, it’s essential to understand both the benefits and potential drawbacks before embarking on this investment journey.

Advantages of P2P Lending

1. High-Interest Rates One of the most alluring aspects of P2P lending, especially on platforms like Kuflink, is the opportunity to earn high-interest rates of up to 9.83% per annum*. This presents a compelling alternative to traditional savings accounts, which often offer meager returns. However, always check the website for the latest rates. Also, peer-to-peer Investment Interest is paid Gross to anyone across the Globe who invests on the platform.
2. Diversification of Investments Kuflink Auto Products and other reputable P2P platforms offer products that automatically diversify investments across multiple opportunities. This diversification spreads the risk, ensuring that your capital isn’t tied to a single loan.
3. Versatility in Loan Purposes P2P loans cater to a diverse range of purposes, empowering investors with a myriad of choices. Whether you wish to fund small businesses, support property portfolio growth, or finance housing developments, P2P lending provides numerous investment avenues.
4. User-Friendly Platforms Unlike some complex investment options, P2P platforms like Kuflink are designed to be user-friendly and straightforward. With fully online operations and minimal jargon, they cater to both seasoned investors and newcomers. Moreover, P2P lending often allows for low minimum investment amounts, making it an accessible option for beginners.
5. Secondary Market for Increased Liquidity While it’s essential to avoid assuming an early exit from investments, P2P platforms often offer a secondary market. Here, investors can sell their loan parts to others, providing added liquidity in case of unforeseen circumstances.
6. Innovative Finance ISA The introduction of Innovative Finance ISAs revolutionised P2P investing. With Kuflink’s Innovative Finance ISA, you can utilise your annual tax-free allowance to invest in loans and earn tax-free interest, provided you meet HMRC requirements.
7. Enhanced FCA Regulation for Investor Protection The P2P sector now operates under tighter regulations enforced by the FCA, offering investors improved protection. While regulatory approval is essential, I encourage investors to conduct their due diligence and not solely rely on a company’s FCA regulation status.
8. Segregation of Funds: Kuflink prioritises the safety of our investors’ wallet funds by strictly following the client money rules set forth by the FCA. This means that all wallet funds are kept entirely separate from our own firm money. By ensuring this segregation, we can guarantee that your investments are secure and won’t be impacted by the financial health of our firm.
9. Additional FSCS Safeguard: As an extra measure, Kuflink offers the protection of the Financial Services Compensation Scheme. In the unlikely scenario of a bank failure, your wallet funds are further safeguarded up to the value of £85,000. This additional layer of protection gives you peace of mind, knowing that your investments are backed by a safety net.
10. Confidence in Investment Decisions: The robust investor protection measures implemented by Kuflink allow you to invest with confidence. You can focus on your financial goals, knowing that your hard-earned money is in safe hands and that your investments are backed by stringent regulatory guidelines.

Disadvantages of P2P Lending

1. Risk to Capital Unlike savings accounts protected by the Financial Services Compensation Scheme, P2P investments carry inherent risks. While platforms like Kuflink diligently work to mitigate these risks, there is no guarantee of full repayment, as it relies on borrowers fulfilling their obligations. It is crucial to understand these risks thoroughly before lending on a P2P platform.
2. Platform Variation and Due Diligence The P2P lending landscape encompasses a wide range of platforms, loans, and security types. Conducting thorough research on various platforms is crucial to making informed investment decisions. Understanding operator backgrounds and historical loan performance can significantly impact your choices.
3. Tax Responsibilities and HMRC Requirements Earnings from P2P investments are subject to HMRC tax requirements, and investors must fulfill these obligations. Fortunately, P2P earnings can contribute to the Personal Savings Allowance, exempting tax on interest up to certain limits based on the taxpayer’s rate.
4. Peer to Peer Investments are normally not FSCS protected Investments in Peer to peer Investments are not FSCS protected unless you have been advised on the investment, where protection may be available if the adviser has ceased trading and the advice was questionable.

Conclusion – Advantages and disadvantages

In conclusion – Advantages and disadvantages – P2P lending offers an array of advantages, including high interest rates, diversification, and user-friendly platforms. However, it’s vital to remain aware of the potential risks involved, such as the lack of FSCS coverage and variation between platforms. Conducting thorough research and staying informed will empower you to make prudent investment decisions tailored to your financial goals.

FAQs

Advantages and disadvantages

1. How much interest can I earn with P2P lending on Kuflink?
   Kuflink offers attractive interest rates of up to 9.83% per annum* on P2P investments. However, always advise clients to check the website for the latest rates.
2. Are my investments fully secure with Kuflink’s Innovative Finance ISA?
   While Kuflink takes measures to protect investments, it’s essential to recognise that P2P investments are not covered by the FSCS, and your capital is at risk.
3. Can I withdraw funds from my Flexible ISA investment during the period?
   Yes, Kuflink’s Flexible ISA allows investors to withdraw funds during the current period for added flexibility.
4. How does Kuflink manage the risk of interest and default?
   Kuflink takes on the risk of interest and default, ensuring that investors’ cash flow is unaffected even if borrowers fail to repay.
5. What types of loans are available on Kuflink’s platform?
   Kuflink offers a variety of loans, including Innovative Finance ISA products that spread investments across multiple UK properties and 1-year select loans secured on a single UK property, allowing investors to choose according to their preferences and risk appetite.