What is an ISA?

The ISA has been a staple within the finance industry since 1999, replacing the Personal Equity Plans and Tax-Exempt Special Savings Accounts of the time (PEPs). According to HM Revenue and Customs, as of last year, over 11 million people across the country were in possession of some sort of ISA.  The popularity of the ISA is well-founded. As ISAs aren’t subject to tax deductions, you can invest your money without having to worry about losing any of your returns. How much money can I invest in an ISA you ask?  Currently, you can invest up to £20,000 in any tax year.  You can then invest the capital interest that you’ve earned to grow your returns even further. This is known as compounding your interest.

A way to invest your capital tax-free, ISAs have been popular since the word go. Whilst the popularity of the ISA may seem unwavering, it pays to point out that However, in 2009 the number of people who had an ISA was a little short of 16 million, it’s now just 11 million, meaning that in an 8-year period, interest in ISAs has dropped by over 32%.

It would seem then that traditional cash ISAs and Stocks and Shares ISAs are on a downward trajectory, but why?

In all likelihood, the returns on offer may well be responsible to see why people are placing their money elsewhere to earn a better return even after tax. As of March 2018, the highest cash rate that was on offer was 1.3%, which isn’t exactly lucrative, to say the least.How much can I invest in an ISA

New beginnings

So where are people going? Eldorado? Not exactly. As of 2016 the advent of the IF ISA saw many people up sticks and dip their toe in the waters of alternative finance. The Innovative Finance ISA (IF ISA) was introduced as a way to invest your money in peer to peer lending in a tax-free wrapper.
So now that we know “how much can I invest in an ISA”, what about IF ISAs, do the same rules apply?

Whilst there may be a few subtle differences IF ISAs still allow investors to invest up to £20,000 completely tax-free. This £20,000 limit is for one tax year only. If you invested £10,000 in January for example, you would then have up until the end of the tax year to fill (if you wanted to) your allowance of £20,000.

The House Crowd IF ISA

For those who have already pondered the question “how much can I invest in an IF ISA?” , you may be wondering how the money that you invest is allocated.

Is it all piled into one investment? Definitely not. We firmly believe that when it comes to investing diversification is a sensible strategy.  As the great Ralph Emerson once said, “Common sense is genius dressed in its working clothes.”

Our IF ISA product operates across a 3-year term and automatically diversifies whatever amount of money you invest across a diverse portfolio of bridging loans and development loans. This means that your risk is minimised, and your capital is diversified as far as practicably possible.  Spreading your risk can be likened to spreading butter. The more you spread it, the better you are covered.

Many IF ISAs are offering interest rates that far superior to those offered by the traditional services such as banks, so it’s hardly surprising that people have left for greener pastures.

If you would like to learn more about our IF ISA product, please visit our dedicated IF ISA product page.