Introducing the Innovative Finance ISA
The recently launched Innovative Finance ISA allows lending platforms to offer peer-to-peer loans within an ISA. Doctors who invest could see annual interest of between 3% and 6% depending upon the ISA provider. When paid within an ISA this interest is, of course, tax-free.
Those doctors who have already used their ISA allowance or plan to do so elsewhere may still be able to get tax-free interest from peer-to-peer lending. Interest from peer-to-peer loans counts as savings income, which for many doctors could be covered by the personal savings allowance. This allows basic rate taxpaying doctors to receive £1,000 savings income a year tax-free, and higher rate taxpaying doctors can receive £500 savings income a year tax-free.
Further income tax relief is available on losses on peer-to-peer loans. Losses on loans made through a peer-to-peer platform (i.e. bad debts) automatically reduce the amount of interest taxable on other loans made through the same platform. For example, if in the same tax year you make a loss of £200 on one loan but earn interest of £300 on other loans held on the same peer-to-peer platform, bad debt relief would reduce the taxable interest to £100.
Tax rules are subject to change and the value of any benefits depends on individual circumstances. If you would like to discuss the Innovative Finance ISA with a financial adviser please contact Richard Higgs CFP FPFS on firstname.lastname@example.org or 0117 966 5699.