ISA season is here, and savvy investors across the UK are already shopping around for the best tax-free investment opportunities.
Innovative Finance ISAs (IFISAs) allow peer-to-peer lending investors to shelter their interest from taxation, while potentially earning inflation-beating returns. So which platforms are offering the highest IFISA returns for the 2022/23 tax year?
Several P2P lending platforms are currently advertising target returns of nine per cent or more. But of course, each of these returns comes with an element of risk. With P2P lending, the key risk is that the borrower is unable to repay the loan, resulting in the loss of the investor’s capital.
This risk can be reduced by doing thorough due diligence on each platform to ensure that they are fully regulated, with a solid track record of risk management and an ability to maintain a low default rate. Investors can also reduce the risk of capital loss by diversifying their IFISA investments across multiple projects and platforms.
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Once this risk assessment has been completed, it is time to consider the returns.
Over the past few months, many P2P lending platforms have increased their target investor returns by as much as two per cent in some cases.
Earlier this year, Kuflink increased its target rates to 9.73 per cent per annum, up from its previous target of 8.05 per cent, and Crowdproperty raised its rates from between 6.2 per cent and 7.8 per cent per year, to between 7.5 per cent and 8.5 per cent per year. JustUs increased its IFISA returns from an average of eight per cent per year, to 8.5 per cent. And in December, Easymoney announced a 0.5 per cent increase across all three of its investment products, with target returns now ranging from 4.53 per cent to 6.51 per cent.
In total, 19 IFISA providers are now advertising returns of nine per cent or higher.
The highest target returns are being offered by business lender Share Credit, which is targeting returns of 16 per cent. Another business lender, Crowd2Fund, is targeting returns of between eight and 15 per cent. Consumer lender Fund Ourselves is advertising returns of up to 15 per cent on its loans. High-end property lender CapitalRise is targeting returns of up to 11 per cent for the current tax year. And fellow property lender Shojin is targeting up to 15 per cent.
Meanwhile, Sourced Capital – winner of the Peer2Peer Finance Awards IFISA Provider of the Year trophy – is targeting returns of up to 12 per cent. Boutique investment management firm Rockpool is also targeting 12 per cent, although its IFISA products are aimed exclusively at high-net worth investors.
Property lenders Proplend, Relendex, and LandlordInvest are all targeting IFISA returns of up to 12 per cent.
Consumer lender Elfin Market is targeting returns of up to 10 per cent. HNW Lending and Guarantormyloan are both also targeting 10 per cent for their investors. And business lender JustUs is targeting returns of up to 10.29 per cent, albeit with a comparatively high minimum investment threshold of £10,000.
Several other platforms, including Kuflink, Lendwise, London House Exchange, and Simple Crowdfunding, are all aiming for returns of between nine and 10 per cent.
As the rate of inflation stabilises at around 10 per cent, there are plenty of P2P lending and crowdfunding platforms which are able to offer competitive rates to investors.
Look out for more IFISA reporting from Peer2Peer Finance News as the ISA season heats up and new offers are revealed.
Read more: Why are P2P platforms raising their rates?