Investors can start putting money into Innovative Finance ISAs (IFISAs) with as little as £1, to boost their returns at a time when rising inflation is eroding cash savings.
There is a wide variety of IFISAs on the market – the tax wrapper around peer-to-peer investments – with differing minimum amounts.
Some platforms only require a very low threshold to cater for everyday investors and others focus on high-net-worth investors with large minimum investments.
Read more: Innovation in the IFISA transfer window
You can put up to £20,000 into an IFISA and enjoy tax-free earnings on your income.
Here Peer2Peer Finance News looks at some of the opportunities in the IFISA market.
There are six IFISA providers accepting investments of £10 or less in the current 2021/2022 tax year.
There is no minimum investment at P2P pawnbroking platform Unbolted, which offers target returns of up to 12 per cent by investing in secured loans, which can be held in an IFISA wrapper.
Meanwhile, Abundance Investment allows lenders to invest in environmentally-friendly crowd bonds which are also IFISA eligible, with just a £5 deposit.
You only need £1 to open an account at Assetz Capital, where you can invest in secured P2P business loans and support UK small businesses and property developers.
Share Credit, Loanpad and Rebuildingsociety all have a minimum investment threshold of £10.
Property lender Loanpad targets returns of three to four per cent across two different IFISA accounts, with interest paid daily.
Share Credit has a minimum of either £10 or $10 (£7.14), with target returns of up to 16 per cent.
And Rebuildingsociety’s IFISA has an average net return of 6.6 per cent as of 31 July 2021, which fund small businesses in the UK.
At the other end of the scale, for investors with more money to put into IFISAs, there are also some options with higher minimum investments.
To invest in a Blackfinch Investments IFISA, investors need to spend £15,000 and to lend money through Folk2Folk the minimum threshold is £20,000.
Soaring inflation means that people are set to see the value of their cash savings eroded, bolstering the appeal of IFISAs.
According to the Bank of England’s latest survey on inflation expectations, inflation will reach 2.7 per cent over the next year and 2.2 per cent in the following 12 months.
The average interest rate on a cash ISA is just 0.37 per cent, according to Moneyfacts.
Meanwhile, research from Peer2Peer Finance News in April revealed that IFISAs have maintained average returns above eight per cent per annum for the past four years.
IFISAs are an investment product so carry a level of risk. Therefore, it’s important to do your due diligence and only invest in P2P loans as part of a diversified portfolio.