Who wants to be an IFISA millionaire?

The Innovative Finance ISA (IFISA) is barely three years old, but it’s already piquing the interest of savvy investors who want their money to work harder.

The IFISA is a tax wrapper for money invested in peer-to-peer loans and other alternative investments and can offer double digit tax-free returns.

10% average annual returns

Some marketplace lenders who also provide IFISAs, currently offer average annual returns of up to 10%.

With projected returns at 10%, if you invested the full annual ISA allowance of £20,000 this tax year, and every year for the next 18 years, you could turn your £360,000 investment into more than £1 million – thanks to compounded returns of 10% p.a. and your tax-free ISA wrapper. This calculation does of course depend on the investments performing as expected and does not include the effect of any fees, which some platforms may charge.

Put simply, in less than 20 years, you could potentially become an Innovative Finance ISA millionaire.

That’s a relatively short amount of time, especially when compared with other ISA options such as Cash ISAs which, whilst being low risk and covered by the Financial Services Compensation Scheme would likely take twice as long to produce such significant returns.

Becoming an IFISA millionaire

Average Annual ReturnsAnnual ISA
Become an ISA Millionaire in
Cash ISA2%£20,00035 years
Finance ISA
10%£20,00018.8 years

Tax-free portfolios

Traditionally, options for your annual ISA allowance were limited to saving in the low risk, but low interest Cash ISA (rates currently between 1% easy access and 2% fixed, as above) or investing in a Stocks and Shares ISA for the potential to earn greater interest, but with the risks and volatility of the Stock Market, where the value of investments can go up and down.

An Innovative Finance ISA, whilst not without risks, also allows you to stockpile your gains tax-free, which of course has a profound effect on your total investment returns over time.

In many cases, you can transfer existing ISA funds into your preferred IFISA, which can make the transition from mediocre investor to potential millionaire much quicker.

Innovative, but unknown

Despite the ability to maximise the power of your investment and receive a significant return there is a lack of understanding around Innovative Finance ISAs – and the great rewards they can reap.

However, IFISA subscriptions are growing, with P2P Finance News reporting that HMRC data shows £290 million of subscriptions for the 2017/2018 tax year across 31,000 accounts.

Make your money work harder

IFISAs have the same tax wrapper as other ISA products, and can be held alongside them – as long as you’re within your annual limit.

You can transfer existing ISAs into an IFISA and continue to benefit from the tax-free status, which is great news for investors who want to make more from their existing ISAs.

Investing in an IFISA could make your money work harder for you and help you achieve higher returns over a shorter period.

Prime property investment with an IFISA

CapitalRise offers an Innovative Finance ISA for investments in prime property development, with returns of 8-12% p.a.

Find out more about CapitalRise’s IFISA and its prime property investment opportunities.

Investors should be aware that unlike with Cash ISAs, investing places your capital at risk and there is no compensation for poor investment performance. Forecasts are not reliable indicators of future performance. The content of this promotion should not be construed as offering investment or tax advice. Tax rules and allowances depend on your circumstances and may change. The opinions set out in this document are not capable of being applied universally and following them will not guarantee success.

Capital at risk. No FSCS protection. See key risks.