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IFISA Decoded

A Tactical Guide to Maximising Returns

15th February 2024

Welcome back to this year’s series of ISA Season articles. In this article, we will cover how you can maximise your returns. The two key things to keep in mind when looking to maximise your returns are:

1) Your ISA investment allowance is £20,000 per tax year, meaning you can only add up to a total of £20,000 across all of your ISA products.

2) All of the interest earned by your ISAs are tax-exempt so long as your ISAs remain valid. Investing over your allowance is the quickest way to invalidate your ISA.

So, how do you maximise your returns, and as a result your profits?

Chase high-interest rates

The Bank of England provides a series of useful statistics, including the rolling monthly average interest rates on various financial products. Over the past decade, the average interest rate on Cash ISAs has been roughly 1.53%, though this is skewed by increasing rates since 2022. At Crowd2Fund, we offer interest rates of up to 18%, with a floor of 6%.

Utilizing tax breaks is a smart financial move. Investing in an Innovative Finance ISA (IFISA) enables your funds to grow without being subject to taxes, as they are held within the tax-free wrapper of an ISA. This ensures that interest repayments are not subjected to income tax, which typically stands at 20% for basic-rate taxpayers on non-ISA interest exceeding £1,000. Furthermore, while IFISAs can constitute part of an estate for inheritance tax purposes, they can also be handed on to a spouse without paying any related tax.

Make the most of your annual allowance

Each year, HMRC sets a tax-free savings allowance applicable to all ISAs. The current allowance stands at £20,000 per year. This allowance cannot be carried over to the next year, so any unused portion is forfeited as the new tax year begins. To shield as much of your savings from taxation as possible, aim to fully utilise your allowance before the end of each tax year. Additionally, if you are married, remember that you can utilise your spouse's allowance to avoid income tax on up to £40,000 annually once you've maxed out your own allowance.

Reinvest and capitalize on compound interest

As a Crowd2Fund IFISA investor, you receive monthly payments that can be reinvested in new opportunities. This allows you to continuously earn interest on your earnings, leading to potential rapid growth over time. To further boost returns, consider reinvesting your repayments monthly into a specific business, provided your lending amount is £100 or more. Alternatively, if your monthly repayments are lower, use Crowd2Fund's Smart-Invest function to automatically reinvest in live opportunities matching your risk profile, diversifying your portfolio.

Diversify through The Exchange

Risk management is crucial in investments, and diversifying your portfolio across various companies and sectors is an effective strategy. The Crowd2Fund Exchange allows investors to purchase existing loans from other investors, expanding the range of investment possibilities. This unique feature enables you to choose specific businesses to support rather than being part of a pooled fund, providing a personalized approach to lending money. Investors can assess and select the companies they want to support, enhancing control and flexibility in their investment strategy.

Estimate your tax-free earnings here.  

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Past performance and forecasts are not reliable indicators of future results. Tax treatment of any of the investment offers will depend on the individual circumstances of each investor and may be subject to change in the future. If you are unsure about any aspect of the information provided by the company, you should seek advice from an independent financial adviser. Do not invest more than you can afford to lose. Investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Investing in start-ups may expose the individual concerned to a significant risk of losing all of the money or other assets invested. Peer-to-business lending through Crowd2Fund is not the same as holding a bank or building society savings account. When making a peer-to-business loan, your capital lent to a borrower is not covered for compensation in the event of a loss by the Financial Services Compensation Scheme. It may prove impossible to recover all or part of the loan by calling in the business assets held as security on that loan. Reward and Donation funding types are not regulated by the Financial Conduct Authority Crowd2Fund Limited is authorised and regulated by the Financial Conduct Authority (FRN 623683). Crowd2Fund Limited is registered in England and Wales. Registered No. 08472687 Registered Address: 242 Acklam Road, London, W10 5JJ. 


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Risk warning

Past performance and forecasts are not reliable indicators of future results. Your capital invested is not covered for compensation in the event of a loss by the FSCS. Tax treatment will depend on the individual circumstances and may be subject to change. Please see our Risk section before making an investment decision.