Maximise Your Returns with Tax-Efficient Investing in the UK

In a world with current high interest rates and rising inflation, investors need to make the most of their money. Peer-to-peer lending is becoming a worthwhile option for investors as the industry continues to expand, in 2024. The industry has seen significant growth since 2016 and as it matures, we can identify corresponding trends and a diverse range of investment opportunities.

The UK offers several tax-advantaged accounts and investments that can help individuals reduce their tax burden. The most common types of accounts offered are ISAs and Pensions, although there are many different accounts available there are certain criteria you must meet, and it may not apply to everyone.

For high-net-worth individuals and self-certified sophisticated investors, the most prominent accounts used for peer-to-peer lending are the Innovative Finance Individual Savings Account (IFISA) and a Small Self-Administered Pension Scheme (SSAS). The use of these investment avenues allows investors to seek tax-free solutions to their investments providing the best possible return. They can also be used in conjunction with each other to receive the most efficient tax-free benefits.

 

What is an Innovative Finance ISA?

The IFISA is a type of ISA that allows you to lend money through peer-to-peer (P2P) lending platforms while earning tax-free interest. Investors choose IFISAs because they provide investment opportunities and tax benefits on returns made. IFISAs are a popular choice for UK investors wanting to expand their investment portfolio beyond stocks and bonds.

Another great benefit to using the IFISA is compounding interest; the interest earned in one period adds to the principal, and in subsequent periods, interest is earned on the new total. By utilising the full £20,000 investment allowance, the compounding affect can be powerful for investors.

 

Differences between IFISA and other types of ISAs.

The distinguishing factor of IFISAs compared to other ISAs, such as Cash ISAs and Stocks and Shares ISAs, is the risk-return dynamic. Cash ISAs, being low risk, yield lesser returns and are typically preferred for short-term savings. While Stocks and Shares ISAs offer potentially higher returns via equity and bond investments but carry market risk. The IFISA provides a middle ground, presenting an alternative investment avenue for investors.

 

What is a SSAS pension?

Small Self-Administered Schemes (SSAS) are a type of UK pension scheme designed for small businesses, typically allowing a maximum of 11 members, who are usually directors or key employees of the company. These pension schemes offer control and flexibility in investment choices that are not commonly found in other types of pension plans, making them an attractive option for investors looking for more personalised pension management and investment strategies.

 

Like the IFISA, SSAS pensions play a significant role in tax-efficient investing for UK businesses and their key employees or directors. The structure of SSAS pensions allows for various tax advantages, which can enhance the growth of pension funds and ultimately contribute to more substantial retirement savings through the loan back feature.

 

Here at Sourced Capital, our peer-to-peer lending platform is dedicated to facilitating a more intelligent approach to investing. We connect high-net-worth and sophisticated investors with investment opportunities through UK property-backed loans; empowering you to diversify your portfolio and earn attractive tax-efficient returns.

 

Here’s how our process works:

  • Investors choose a property project to invest their money into
  • Money is lent to borrowers via the Sourced Capital platform.
  • Borrowers use this money to complete their property projects.
  • Lenders then earn interest on the money that they lend.
  • When the project is complete, the borrowers repay the loan to lenders
  • Lenders can then choose to re-invest in a new project or withdraw their funds.

 

Our mission is to empower investors to invest smarter. By expanding the boundaries of traditional banking, peer-to-peer (P2P) lending paves the way for investors to broaden their horizons. It allows them to explore, engage with, and benefit from a range of investment avenues previously inaccessible within the limits of traditional banking. Our FCA-regulated peer-to-peer lending platform provides you with the opportunity to invest at your own pace, in a simple and repeatable way.

Discover how you can potentially enhance your investment returns with tax-free investing through peer-to-peer lending.

If you are interested in how you can utilise the benefits of tax-free investing through your SSAS pension or would like to set up an IFISA, book a call with our investor team today and discuss your eligibility.

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