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British Pearl

Don't forget the Innovative Finance ISA

2 September 2018 • British Pearl

The Individual Savings Account (‘ISA’) was introduced by the government in 1999 in order to encourage UK residents to invest and save. This is done by providing a tax efficient vehicle (sometimes called a wrapper) so that any income or capital gains that are made within the ISA are not subject to tax.

Outside of an ISA, any interest income you earn on savings or loans and any dividends you receive on shares contribute to your taxable income. On top of this, any gains that you make on your investments may incur capital gains tax.

As an example, for every £1,000 income that you receive (over and above your allowances) would incur the following tax payments:

  • Basic rate at 20% would be £200, leaving you with £800 of the income
  • Higher rate at 40% would be £400, leaving you with £600 of the income
  • Additional rate at 45% would be £450. leaving you with £550 of the income

The ISA tax exemptions are in addition to any individual allowances you may have and, as your income and gains do not count as taxable income, you do not need to declare them to HMRC.

What is more, the income earned and any capital gains made can remain within the ISA wrapper and be reinvested to generate more income (compounded) over time. This can make a very real difference to the income that you actually receive on both a month by month basis but also over the longer term as your investment grows.

There are four main types of ISA:

  1. Cash ISAs
  2. Stocks and Shares ISAs
  3. Lifetime ISAs
  4. Innovative Finance ISAs (‘IF ISA’)

British Pearl’s ISA falls into the fourth category, the IF ISA.

Cash ISAs, at the time of writing, offer up to 1% annual interest if you require immediate access to the money you invest. As you commit to longer periods you can receive slightly higher rates which reach 2% annual interest if locked in for five years . British Pearl’s Innovative Finance ISA earns tax-free interest of up to 4.4% with high levels of capital security since your loans are secured against property.

Innovative Finance ISAs were introduced in April 2016, helping people to earn interest on peer-to-peer lending, which matches lenders with borrowers such as property developers, businesses, etc. through online platforms, effectively cutting out the banks. Bypassing banks means lenders can potentially earn higher rates of interest.

By opening an ISA with British Pearl, you are able to invest in our UK property loans without having to pay (i) any income tax on the interest that you receive or (ii) any capital gains tax on gains you make.

If you have any existing ISAs from previous years, you can transfer them over to British Pearl, leaving it in the wrapper. We will manage the transfer process for you free of charge – just complete the form on our website. You cannot withdraw from your existing ISA and send us the money yourself as this would effectively close your old ISA and you would lose the tax wrapper. We do all the leg-work for you and will keep you updated every step of the way. The loans are backed by the property that they are secured against. This means that the loans are repaid first when the property is sold before any cash is distributed to Share Investors.

The British Pearl ISA is 'flexible'. This means that if you take any cash out of your British Pearl ISA you can replace it during the same tax year without using up any of your annual allowance. So, if you had used up all of your allowance but needed to take out £5,000 for an emergency, you would be able to put £5,000 back in before the end of the tax year. There are no charges for opening a British Pearl ISA, transferring an existing ISA or for the day to day management of your ISA. All fees are exactly the same as the standard British Pearl account.

ISAs are only open to eligible investors and tax treatment will depend on your individual circumstances and may be subject to change in future.

If you would like to know more about the British Pearl ISA, click below.

Sources:

  1. Gov.uk / Individual savings accounts
  2. British Pearl / Fees
  3. British Pearl / ISA
  4. Money / Compare Cash ISAs
  5. Which /Innovative Finance ISAs explained

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Your capital is at risk Investing in property involves risk. The value of your investment can go down as well as up and historic performance is not a guide for future performance. Any projections of future performance are based on all information known at the time of share investment or loan, and internal calculations and opinions of British Pearl. These are subject to change and are not guarantees and should not be relied upon as such. Risks include the total loss of your share investment or loan, variable rental income due to property not being rented or a depressed rental market, and inability to sell your share investment or loan due to lack of a buyer. Investing with British Pearl falls outside the remit of the Financial Services Compensation Scheme. Please refer to the Key Risks section of this site for a more comprehensive description of the risks involved.

British Pearl ® is the trading name of British Pearl Limited (Company No. 7151774), a company authorised and regulated by the Financial Conduct Authority (Register No. 674693) and British Pearl Finance Limited (Company No. 10575280 and Register No. 770867), which is an appointed representative of British Pearl Limited. Both companies are wholly owned subsidiaries of British Pearl Group Limited (Company No. 9701436) and all are registered in England and Wales at 4th Floor, 7-10 Chandos Street, Cavendish Square, London, W1G 9DQ