One month on from our investments becoming ISA eligible and we could not be happier with the reception the Abundance ISA has received. More than 1,000 people have opened an ISA with us and there is more than £4.5 million either invested or waiting to be invested in those ISA accounts.
Now that it’s here we are beginning an ISA blog series, of which this is the first post. This month we are going to give you a quick run-down of the most common questions we have been asked about our ISA. If you find your question isn’t answered here take a look at our ISA FAQs or let us know via email, Twitter or Facebook and we will respond as quickly as we can.
How does my Abundance ISA relate to my existing Cash and Stocks & Shares ISAs?
The Abundance ISA is a new type of ISA called an Innovative Finance ISA (IF ISA). Just as with Cash and Stocks & Shares ISAs, you can save up to £15,240 in this tax year between them. So, if you already have a Cash ISA with £1,000 in it and a Stocks & Shares ISA with £5,000 in it, you have £9,240 of your allowance left, some of which you could put in an IF ISA such as ours.
The two most important things to bear in mind are that:
1) You cannot contribute to more than one IF ISA in a given tax year
2) No matter how you choose to split it, you cannot subscribe more than £15,240 into your ISAs in the 2016/17 tax year
What is the rate on the Abundance ISA? Do you pay interest on cash in it?
I will answer the second question first. No. We do not pay interest on cash sitting in your Abundance ISA. This is for the same reason we do not pay interest on cash held in your standard Abundance account. You can read more on why in our FAQs here.
Regarding the rate on the Abundance ISA, the answer is that this will depend on the investments you make. Our ISA works in exactly the same way as a standard investment account on Abundance in that you choose which projects you wish to invest in and how much. The difference is that in an Abundance ISA your returns are tax free for as long as you keep your ISA open. This means that when you fund your ISA account with cash or receive a Cash Return, it is up to you to sign in and invest/reinvest it in order to earn a return on that money.
What investments can I hold in an Abundance ISA?
You can only hold the investments available on Abundance in the Abundance ISA. All the investments on Abundance are ISA eligible, including past investments we have done, so as well as investing into our new offers you can also use the Bulletin Board to diversify your investment portfolio.
Is the Abundance ISA a fund?
No. See above – it works in exactly the same way as a standard portfolio. When there is cash in your ISA, you must sign in and invest it for it to be earning you a return.
The Abundance ISA is a flexible ISA. What does this mean?
Starting from this tax year, flexible ISA providers let you withdraw money from your current year ISA and replace it before the tax year is up, without it reducing your annual limit. In the past withdrawing from your ISA meant that you had lost that part of your annual allowance for good. The flexible ISA gives you the freedom to withdraw your cash for whatever reason and pay it back in later in the same tax year without it affecting your annual allowance. Please note that you can only withdraw money if it is available as cash in your Abundance ISA.
There are two important rules for a flexible ISA:
- You must replace the withdrawal with the same ISA provider. So if you withdraw money from your Abundance ISA, you must return it to your Abundance ISA. If you return it to another ISA that you have, this will count as an additional subscription that year.
- You must replace all or part of the withdrawal before the end of the tax year for it to retain its tax free status. If you return the withdrawal in the following tax year this will count as a new subscription and reduce your remaining annual allowance for that tax year.
For more information about the flexible ISA including an example of how it works, please read our ISA FAQ.
Can I transfer an existing ISA? If it is a previous year’s ISA, how does this affect the number of IF ISAs / Abundance ISAs I can open this tax year?
Yes, you can transfer existing current year and previous years ISAs. For an explanation of how to transfer existing ISAs, read the ISA transfer section of the website.
I am an existing investor in Abundance projects. Can I transfer my investments into an ISA?
The process of transferring existing investments into an ISA is called Bed & ISA (we aren’t sure why!). This process requires you to have sufficient annual ISA allowance remaining to cover the value of the investment you want to transfer.
While the process is not yet in place for IF ISAs we do expect it to become available shortly. Our team is currently working towards a solution and actively seeking the right partner to help us provide the service. As this is one of the most commonly asked questions we get, rest assured we are working hard to make this feature available as soon as possible.
Part or all of your original capital may be at risk and any return on your loan or investment depends on the success of the project. Investments tend to be long term and may not be readily realisable. Estimated rates of return are variable and estimates are no guarantee of actual return. Consider all risks before investing.