What is an Innovative Finance ISA?

Learn about the Innovative Finance ISA and how it lets you earn tax-free returns when making direct investments on Abundance

Updated over a week ago

What is an ISA?

An Individual Savings Accounts (ISA) is a Government initiative to encourage individuals to save and invest by giving everyone resident in the UK the opportunity to save and invest a certain amount each year and pay no tax on the returns from this money.

There are different types of ISA, including:

  • Cash ISA

  • Stocks & Shares ISA

  • Innovative Finance ISA

  • Lifetime ISA

You can save or invest up to a certain amount each tax year and earn tax free returns. Your ISA allowance for 2023/2024 is £20,000. You can open one of each type of ISA each year, and spread your iSA allowance between them (a Lifetime ISA is limited to £4,000 each year).

You can also transfer money between your ISAs, including between different types of ISA and moving money that you invested in previous tax years.

What is the Abundance Innovative Finance ISA?

An Innovative Finance ISA (IF ISA) is a particular type of ISA that lets you make investments in a range of alternative investment products, including the direct investments we offer on Abundance.

On Abundance you can open an IF ISA to make investments in the direct investments that are open or available on our marketplace. Any returns you receive back from the investments you hold in your Abundance IF ISA will go back into your ISA and are tax-free. You can choose to re-invest your returns into new investments without it affecting your remaining annual ISA allowance.

Invest up to £20,000 tax free

The Abundance IF ISA allows you to subscribe up to £20,000 in the current tax year and protects the returns on the direct investments you make from tax.

Spread your allowance across different types of ISA

You can open an IF ISA alongside an existing Cash or Stocks & Shares ISAs you might have, but you can only open one IF ISA each tax year.

If you opened an IF ISA with another provider in a previous tax year, you can still open an Abundance IF ISA in the current tax year and keep your previous IF ISA, provided you don't use some of your £20,000 annual allowance with both IF ISAs - you can only deposit money to one of each type of ISA in each tax year, this is what is meant by 'open'.

Transfer your existing ISAs

If you have already built up tax free savings from a previous tax year in another ISA (of any type), you can transfer some or all of this money to your Abundance IF ISA, no matter how big the pot. This allows you to diversify your ISA portfolio while keeping the tax free benefit.

If you're transferring money from another ISA provider to your Abundance IF ISA, always remember to use the official transfer form process to ensure you maintain the tax free benefits of the money in your ISA. See our Help Centre article Transfer an ISA to Abundance for more details.

Please remember, holding your investments in an IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free. The tax treatment of your investment will depend on your individual circumstances and may change in the future.

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