A Lending ISA

Earlier this year, the Chancellor announced that the government was committed to the inclusion of peer-to-peer lending within ISAs – a huge moment for the industry.

Previous research of ours found that 41% of investors would invest more in marketplaces like Funding Circle if it was included within ISAs, and one in ten people said they would transfer their existing stocks and shares into a ‘Lending ISA’. Additionally, TISA (Tax Incentivised Savings Association) estimates that more than £50 billion is invested in ISAs every year. If just 3% of this money was channelled through marketplaces such as Funding Circle it would create more than £1.5 billion of new lending to businesses annually, leading to approximately 75,000 new jobs.*

Since March we have been working closely with the Treasury and other players in the industry to refine exactly how this would work. Last Friday the consultation came to a close and we wanted to share our topline recommendations.

We have recommended that the government introduce a third ‘Lending ISA’. Currently you can have a cash ISA and a stocks and shares ISA, but lending to businesses is different to depositing money in a savings account (hence the higher return), and is less volatile than investing on the stock market. A third ISA will give investors more flexibility and allow for a higher level of diversification, as you will be able to choose how best to allocate your £15,000 limit across three types of investment depending on your risk appetite.

It will also mean that Funding Circle will become an ISA manager, which would be challenging if wrapped up in a stocks and shares ISA, as we would not be able to offer this type of investment. The benefit of this would be that you will be able to own all of your investments yourself, rather than go through a third party ISA manager. You will also be able to go directly through Funding Circle and invest via your existing account if you wish to.

Finally, we are recommending that investors are able to transfer their existing Funding Circle investments directly into a Funding Circle ‘Lending ISA’. We also hope that those of you who already have ISAs and would like to diversify across a ‘Lending ISA’, will be able to transfer money across from other types.

Having spoken with many of you over the last period, we hope that this is in line with what would work for you. It’s an exciting development and whilst it will take many months to implement, we will continue to update you as and when we have more information.

Funding Circle’s new Innovative Finance ISA can be found here

If you have any questions then please get in touch or join the conversation on the forum.

The Funding Circle team


*Independent research by government think tank Nesta last year found that businesses that receive a loan through Funding Circle employ on average 11 people, and see an average increase in employment of 27 per cent after receiving finance.


Head of Corporate Communications


10 thoughts on “A Lending ISA

  1. When will we be able to start investing in this type of ISA? Will it be within this tax year or starting in 2015/16 year?

    • Hi Cass, we’re hoping that it will be ready for 2015/16 but will keep you updated on government timings via the blog and newsletter.

  2. I moved to FC from a cash ISA when the bank decided to cut the rate I could get from 2.5% to 1.4% which I took to mean that they were simply taking away the tax I wouldn’t have to pay the government on my income from those funds. In the first two months on FC I have already received more in interest (after allowing for tax) than the bank would have given me for a whole year. If this becomes an ISA I will be even better off.

  3. I’m eagerly awaiting this, having successfully dipped my toe in the water with a ‘normal’ FC account.
    I haven’t used ISA at all this tax year, hoping this would become available – but looks like it will be too late?

    • Hi Guy, unfortunately it won’t be ready for this tax year but we’re hoping it will come in for next year. Will keep you updated on government timings via blog and newsletter.

  4. I closed my Stocks and Shares ISA a couple of years ago, having seen a peak in my investments, I’ve never owned a Cash ISA as I really can’t see the point when receiving such low income from them.

    I’ve been eagerly awaiting the inclusion of crowd funding into an ISA, as this is the only place I save any extra cash now (I know its a risk, but I also lost money in my S&S ISA!), It will also greatly simplify my Self Assessment tax return, since it won’t need to be included.

  5. I also withdrew funds from a non-performing Cash ISA to invest in Funding Circle. I have already made many times more than the bank would have given me per year. In fact if things stay on track, I will be paying many times more in tax than I would have got in interest from the bank. I am chomping at the bit to open an FC Lending ISA.

  6. When this new isa comes into effect I want to invest all my isa allowance in p2p lending across a number of different p2p firms. Say £5000 with FC, £5000with Zopa, and £5000 with Ratesetter. Will there be an isa manager that will allow me to do this?

    • I doubt this will the case, I can imagine that it will be the same as Cash ISA’s one per year per provider, unless it’s a transfer of an existing ISA.

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