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Benefit from a new type of ISA

Could Innovative Finance ISAs be a good way to invest tax-free?

Remember, tax treatment depends on individual circumstances and may change in the future.

The Innovative Finance ISA (IFISA)

IFISAs were introduced a few years ago. They allow investors to include eligible peer-to-peer lending products within the popular ISA wrapper.

How does an IFISA compare?

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Cash ISA

A savings account where you don’t pay tax on your interest.

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Innovative Finance ISA

An ISA that lets you invest in eligible P2P lending products. This ISA puts your capital at risk and is not covered by the FSCS.

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Stocks & shares ISA

Access to a wide range of investment opportunities, including investment funds and listed equities. This type of ISA also puts your capital at risk.

Key things to consider before opening an IFISA

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1

Assess your situation

Investing in P2P lending involves significant risk. The value of your investment and any income from it, can fall or rise. You may not get back the full amount you invest. It’s not suitable for everyone, so you need to make sure it’s right for you.

2

Where is your money being invested?

You need to understand the risks associated with the underlying investment. Investing in property loans, for example, means your investment could be adversely affected by a downturn in the market.

3

One IFISA a year

You can only contribute your annual allowance to one IFISA per tax year. But you can transfer any existing ISA balance to multiple IFISAs. Tax treatment is dependent on an individual's circumstances and may be subject to change in the future.

4

Transfers

Existing ISA balances should only be moved via an ISA transfer process. If you simply withdraw funds or close an existing ISA, you may lose its tax-free status. Remember, IFISAs have a different risk profile to traditional ISAs.

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A different ISA

An IFISA is very different to a cash ISA. It puts your money at risk, so it’s important to assess the risks involved. You can read more about the risks here

A new way of lending

P2P grew dramatically after the financial crisis in 2008. Many providers are relatively young without much track record.

Making a loss

You risk making a loss if the borrower doesn't repay. You should check what providers do to reduce any risks.

No FSCS cover

Unlike other ISAs, IFISAs are not covered by the Financial Services Compensation Scheme (FSCS).

The Octopus Choice Innovative Finance ISA

The Octopus Choice IFISA helps you target attractive returns by investing in peer-to-peer loans backed by bricks and mortar.

Remember your capital is at risk: you may get back less than you put in. Instant access isn't guaranteed. Investments aren't covered by the Financial Services Compensation Scheme (FSCS).

Frequently asked questions IFISA

Eligibility
Transfer
Allowance

If you are over 18, are a resident of the UK and have a National Insurance Number, then you are eligible to invest in an IFISA.

Those new to Octopus Choice can set up an IFISA when they create their Octopus Choice account. Or, if you're an existing user, you can do so from your dashboard.

No, the Octopus Choice IFISA is not a flexible ISA. This means that any money you withdraw from your Octopus Choice IFISA will still count towards your annual ISA allowance.

In other words, if you've invested up to your ISA limit and subsequently withdraw money from your Octopus Choice IFISA, you won't be able to invest any money into it in the same tax year.

Yes, you can transfer existing ISAs into an Octopus Choice IFISA. Before you do it’s important to remember that an IFISA is not a cash savings account and has a different risk profile to a traditional cash ISA. This means, the value of your investment and any income from it, can fall or rise. So, you may not get back the full amount you put in.

You'll first need to create an Octopus Choice IFISA account to transfer into.

You can create an IFISA account from your account dashboard if you're already a customer.

You can transfer cash ISAs and Stocks & Shares ISAs into an Octopus Choice IFISA. For cash ISAs, be aware that you can't transfer them back until the following tax year, unless it's a flexible cash ISA. Before you do it’s important to remember that an IFISA is not a cash savings account and has a different risk profile to a traditional cash ISA.

In the case of a Stocks & shares ISA, we recommend checking your provider’s charges and exit fees before making any decisions.

Do you accept partial ISA transfers into Choice?

Yes, we accept full and partial ISA transfers.

Your current provider needs to receive a signed transfer request from you. Sending your transfer direct to your current provider will speed up the process significantly.

Cash ISA transfers typically take between one and two weeks to complete. Stocks & Shares ISAs could take up to four weeks. If you want to check on the status of your transfer, please get in touch.

Yes. We'll drop you an email as soon as we've received your funds.

The process takes between two to four weeks, we'll make sure to chase your provider and request an update for you.

Any ISA transfers will be consolidated into your Octopus Choice IFISA account. You can then continue to pay in to your Octopus Choice IFISA as often as you like, bearing in mind the annual ISA limit.

You can split your ISA investments across cash, stocks & shares and innovative finance ISAs, providing the overall amount doesn’t exceed the ISA allowance. You are, however, only allowed to invest new funds into one of each type of ISA a year.

You can fund your Octopus Choice IFISA by bank transfer, cheque or debit card.

You're also able to transfer funds from your current Octopus Choice account into your Octopus Choice IFISA, although you should be aware that the rate you earn and the number of loans in which your money is invested is likely to change.

So long as you let us know within 30 days of making your investment that you want to withdraw funds from your ISA, then we should be able to facilitate this without it counting towards your annual ISA allowance.

If you leave it longer than 30 days, then your investment will have been declared to HMRC. This means that although you will be able to request a withdrawal of your funds, it will still count towards your ISA allowance.