Property crowdfunding platform The House Crowd has launched its first Innovative Finance Isa (IF Isa), offering savers a fixed rate of 7% a year tax-free.
Investors can use their annual allowance before the end of the 2017/18 tax year on 5 April 2018. However, savers looking to transfer money from other Isas will have to wait until later in the year - The House Crowd expects this to be possible from June 2018.
Founded in 2011, The House Crowd offers investors a property-based investment portfolio that includes a choice of crowdfunding or P2P lending. On the P2P side, with a minimum investment of £1,000. It has received full authorisation from the Financial Conduct Authority (FCA) to operate as a peer-to-peer firm.
Investments, which are secured against the borrower's land or property, start at a minimum of £1,000 and can go up to a maximum of £20,000 in any one tax year. Funds are automatically diversified across the whole of The House Crowd Isa property portfolio. Savers can transfer or withdraw their funds after a minimum investment term of three years, so long as they give three months' notice.
Frazer Fearnhead, chief executive of The House Crowd, says: “We are very excited to be able to offer our investors the chance to benefit from our first IF Isa. We believe this is the Isa that’s going to get Britain building and help solve the housing crisis. We need to be able to utilise funds quickly and effectively, so we intend to limit initial investment to just £2 million. We will release other IF Isa products in 2018 tax year with different terms and criteria.”
“Most importantly, investors in these secured loans have not lost any capital since we started offering them three years ago. Now they are able to earn attractive returns with the same level of security within a tax-free wrapper," he adds.
However, it’s worth remembering that unlike cash Isas, with an IF Isa your capital is at risk and the value of your investment can rise or fall, depending on how your investments perform. Your funds will also not be protected by the Financial Services Compensation Scheme (FSCS), which protects cash savings up to £85,000 per financial institution. But, as with a Stocks and Shares Isa, you are likely to get higher returns on your investment. The House Crowd says that it will cover 10% of any losses in the event of a bad debt.
You can invest up to £20,000 in an Innovative Finance Isa during the 2017/18 tax year, and can split the sum between different types of Isa. For example, you could save £10,000 in an IF Isa and £10,000 in a Cash Isa in the current tax year. You also have the choice of transferring your Isa savings from previous years into an IF Isa.