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How To Lend Across Multiple IFISAs In One Year!
The information below only applies up to 5th April 2024. After that, it becomes even easier to lend in multiple IFISAs. For the rules from 6th April 2024, read the The Peer-To-Peer IFISA Guide.
As you may know, you can only open one IFISA in a tax year, which runs from the 6th of April to the 5th of April, and this limits your ability to spread your money and the risks across lots of providers.
But you're wrong!
You're actually allowed to open lots of Innovative Finance ISAs in one tax year. The rule is that you're not allowed to put new money into more than one IFISA.
So it's possible to create a portfolio of half-a-dozen IFISAs and hundreds or thousands of loans over the course of a few weeks, rather than years, in order to rapidly shrink the risks of lending even further.
Opening more than one IFISA
HMRC has confirmed to 4thWay that there's no limit to the number of IFISAs you may open in a year. The rules just mean that any new money invested between the 6th of April one year and the 5th of April the following year must always be in a single IFISA. Presumably, this rule makes it easier to ensure that annual ISA limits are not breached.
In other words, you can open an IFISA for new money, which is capped at £20,000. And you could open another new IFISA at the same time, into which you might transfer other, older money from an IFISA that you contributed to in an earlier tax year.
You may open as many IFISAs as you want at any time with the intention of transferring in different pre-existing cash ISAs, share ISAs or IFISAs into those new IFISAs.
Indeed, there's no limit to this. You can often even split up a single, older ISA into several new IFISAs through partial transfers…
Partial transfers from other ISAs spread your money even faster
If you just have one or two other ISAs, some IFISA providers allow you to make partial transfers out and, on the other side, to transfer in part of the money from an existing ISA.
So it's pretty easy to split an old ISA into several new IFISAs. You create a large portfolio of IFISAs and loans over the course of a few weeks, rather than years, rapidly shrinking the risks of lending even further.
As of the latest update to this page in January 2024, CapitalStackers*, CrowdProperty, Downing Crowd, Folk2Folk, HNW Lending, Housemartin*, Invest & Fund*, Kuflink*, LandlordInvest, Lendwise*, Loanpad*, Money&Co, Proplend* and Sourced Capital have confirmed that they will allow partial transfers in and out of their IFISAs, with no special fees or small print. That is not a complete list, but it is 13 out of 14 IFISA providers that we have asked, so I am sure that most others do so as well, if you ask them.
Of the above, Folk2Folk has a minimum IFISA contribution of £20,000 that must be maintained.
Fund Ourselves has confirmed it will allow partial transfers in, but not out.
Cash ISAs and share ISAs usually allow partial transfers out of cash, too. For example, the latest terms and conditions for Hargreaves Lansdown's popular Stocks & Shares ISA allows partial transfers out to other ISAs. Similarly, small print for Nationwide Building Society's cash ISAs allows for partial transfers out.
What this means is that you could lend across a half dozen or more IFISAs with relative ease within about a month through partial transfers from an existing ISA or ISAs. You don't have to wait a whole year to open your second ISA, then another year for the third, and so on.
Just to be doubly clear, though, you can only do partial transfers of money you contributed in previous tax years. New money contributed in the current tax year has to stay where it is or be transferred in full. The same applies to interest or gains made on new money. That money becomes “old” as soon as the 6th of April arrives again, in which case it can be split up and transferred out as much as you want.
An example for even more clarity
Let's say you have put £10,000 into your ISAs over the past few years and that pot has grown to £12,000. Next tax year, you want to put in an additional £5,000 into tax-free P2P lending.
That £5,000 will need to all go into one IFISA and it can't be split into more IFISAs until the start of the following tax year. However, the other £12,000 can be split into as many IFISAs as you want, and you can open as many new IFISAs as you want to do so, right away.
What if you have no other ISAs?
If you have no other ISAs right now, you can open several Innovative Finance ISAs before the end of the tax year while putting money into just one of them. At the start of the new tax year, you can put new money into one of the other IFISAs, and transfer out part of the money in the first IFISA to each of the others you opened. So you still spread your money around quickly.
You can also diversify by opening other, “normal” P2P lending accounts, which still typically pay attractive interest rates and, for most people, they will also be tax free.
What if an IFISA provider won't let you do this?
It's up to each provider to decide what it'll let you do, so long as they don't over-reach the rules. But, if they say you can't do it, it's more likely that the person you're dealing with has missed the nuance of these rules. This happened to a 4thWay user, who we helped to open a second account during the same tax year. Read about it in Why You Might Be Missing Out On Instant IFISA Diversification.
Read more:
How Is Peer-to-Peer Lending Taxed?
Why You Might Be Missing Out On Instant IFISA Diversification.
Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
We are not financial, legal or tax advisors, which means that we don't offer advice or recommendations based on your circumstances and goals.
The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.
Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
We are not financial, legal or tax advisors, which means that we don't offer advice or recommendations based on your circumstances and goals.
The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.
*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from CapitalStackers, Housemartin, Invest & Fund, Kuflink, Lendwise, Loanpad and Proplend, and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.
