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Zopa Isa paying up to 6.1% due to launch soon

First major peer-to-peer lending company to gain FCA authorisation

Peer-to-peer lender Zopa could soon be offering an Isa paying as much as 6.1% a year, now that it has been granted full authorisation by the UK’s financial regulator.

This paves the way for the lender to provide an Innovation Finance Isa to investors, allowing them to enjoy higher rates of interest than banks currently offer without paying tax on their profits.

Zopa had previously stated that it would offer the same rates as its existing products – currently between 2.9% and 6.1% a year, depending on the length of the term – once it received the necessary permissions to launch them.

It’s expected that the final pre-requisite of gaining permission from HMRC to become an Isa manager will take a few weeks.

Zopa declined to confirm any details on plans for its Innovative Finance Isa until this process is complete.

Find out more: peer-to-peer lending companies – see our reviews of the UK’s three major peer-to-peer lenders

New investors may still have to wait

Zopa is the first major UK peer-to-peer lender to gain FCA authorisation.

It recently stopped accepting new investments, which it says is due to ‘exceptionally high demand.’ Investors will have to wait until this suspension is lifted before opening an Innovative Finance Isa. Zopa predicted this would take a couple of months.

It’s not yet known whether existing Zopa customers will be able to transfer their existing savings with the platform into an Isa wrapper.

What is an Innovative Finance Isa?

An Innovative Finance Isa allows you to invest money with peer-to-peer lenders in a tax-free wrapper.

The rules same apply as with other Isas; you can add money into one cash Isa and one stocks and shares Isa per tax year. The overall Isa allowance for the 2017-18 tax year is £20,000.

Peer-to-peer lending companies match up savers, who are willing to lend their money, directly with borrowers, essentially cutting out the middle man. They don’t have the same overheads as banks or building societies and can therefore offer superior savings rates.

However, these high rates come with added risk; you may lose your money if the borrowers you’ve lent to fail to repay, although the major companies have safeguards in place to protect investors if this happens.

Find out more: peer-to-peer lending explained – learn about the pros and cons

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