Innovative and Lifetime ISA's

Whilst most are familiar with the relatively well-known cash or stocks and shares ISAs, the ‘newer ISAs on the block’; Innovative and Lifetime, may need a bit more of an introduction.

Innovative ISA

This allows you to invest in peer to peer (P2P) lending within an ISA wrapper. P2P is the process of lending your money to other individuals for a set period of time for a set rate of return. By removing the middle man of the bank, lenders can get better rates of return on their cash and borrowers can pay a lower rate of interest. ​In theory, the process should lead to a better outcome for both lenders and borrowers. However, they clearly come with their own risks in that the borrower may default and you could be left with nothing.

Lifetime ISA

The LISA was introduced in the 2017/18 tax year and designed to be used by either first-time house buyers or saved for later life income. ​You can put in up to £4,000 each year until you are 50 and can be opened from age 18-39. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. ​You can withdraw funds from a LISA any time, but if you do this before the age of 60 and it does not relate to a qualifying house purchase, you could be hit with a penalty.

​Broadly speaking, for the majority of people saving, a LISA is most efficient for first-time house buyers, so this could be an option for yourself or those seeking to help children/grandchildren onto the property ladder.

Nothing contained in this article constitutes or should be construed to constitute investment, legal, tax or other advice. The information contained in this article shall in no way be construed to constitute a recommendation with respect to the purchase or sale of any investment.