Why the Innovative Finance ISA grew by 18% last year

The latest Individual Savings Account (ISA) statistics - released by HMRC in June - show that the Stocks and Shares ISA took a dip in the 2018/19 tax year, while Cash ISA and Innovative Finance ISA (IFISA) subscriptions rose.

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The amount subscribed to Stocks and Shares ISAs fell by £5.2 billion from the previous year, down to £22.6 billion in 2018/19. 

On the other hand, subscriptions to a Cash ISA increased by £7.3 billion, up to £43.9 billion. 

The IFISA also appears to be on an upward trajectory, with £328 million invested in the 2018/19 tax year, up from £277 million in 2017/18. 

In total, the number of Adult ISA (Cash ISA, Stocks and Shares ISA, IFISA and Lifetime ISA) accounts subscribed to in 2018/19 was approximately 11.2 million, increasing from 10.1 million in the previous year. 

This increase was driven, primarily, by the influx of Cash ISA subscriptions, and shows that the ISA and its tax wrapper is still incredibly popular among savers and investors.


Amounts subscribed to Adult ISAs during the 2018/19 tax year. 

Source: HMRC - Individual Savings Account (ISA) Statistics, June 2020. 


The rise of the IFISA

An increase in IFISA subscriptions isn’t particularly surprising. The account allows investors to utilise their £20,000 ISA allowance (for the 2020/21 tax year) to potentially earn tax-free returns higher than those of other, traditional investment methods. 

Read more:download the IFISA guide

And though the recent statistics show that Cash ISA subscriptions increased significantly, the consequences of COVID-19 could see their popularity fall.

In an emergency move in March, the Bank of England (BoE) base rate was slashed to 0.1% - the lowest on record. Currently, the best easy-access Cash ISA on the market is sitting at just 0.9%, with a fixed-rate Cash ISA offering marginally better at 1.21%, and cash savers have experienced the worst six months in over a decade.

Though the IFISA can not be directly compared to the Cash ISA - as the former is an investment product, where returns are not guaranteed, and the latter is a savings product - the recent cuts to the BoE base rate could see experienced investors turning to the IFISA in an attempt to earn a better return on their money. 

But that’s not all. The property-backed IFISA in particular - such as the CARLTON Bonds IFISA - is likely to have a crucial part to play in the recovery of the UK’s economy, as Chancellor of the Exchequer, Rishi Sunak, reiterated the housing sectors importance to job creation and economic growth in the recent economic update.


Investing for impact with a property-backed IFISA

Potential for higher, tax-free returns - with the CARLTON Bonds IFISA targeting returns of up to 7.75% - is just one benefit investors receive when investing into a property-backed IFISA.

Others include the social, economic and environmental benefits that come hand-in-hand with providing alternative finance to highly experienced regional house builders. 

Read more:the UK's unmet housing demand presents opportunity for the property-backed IFISA

It’s no secret that the UK is lacking in high-quality, affordable housing. Alternative finance made available through alternative investment methods is key in tackling this crisis. 

With the help of alternative finance, regional house builders are able to provide high-specification homes that not only tackle the UK’s housing shortage, but also create local jobs. 

House building alone supports almost 750,000 jobs, and as Rishi Sunak stated in the economic update, “one of the most important sectors for job creation is housing.” 

Jobs in construction, plumbing, real estate and - importantly - apprenticeships are made available by regional builders, and advanced training is often provided when innovative new build methods are utilised. 

Now more than ever, taking care of the environment and employing environmentally friendly practices in all aspects of life and business is at the forefront of everyone’s minds. 

Regional house builder Homes by Carlton (CARLTON Bonds’ Strategic Delivery Partner) have successfully trialled CoreHaus - a modular housing solution that reduces construction waste and build costs, while increasing the delivery of high-quality homes - on their Cathedral Gates development.

Read more:our latest lending project: Cathedral Gates, County Durham

The conservation of the UK’s countryside by, where possible, building on brownfield land is also incredibly important. However, many smaller brownfield sites are often overlooked by national builders because they don’t provide the appropriate scale. 

But smaller brownfield land is commonly located in a prominent position within an area, and when regenerated, has the potential to become a beautiful, area-boosting housing development that brings with it a variety of benefits.  

For example, Cathedral Gates was developed on a former petrol filling station in a prominent location within the small town of Chilton, County Durham. After Homes by Carlton carried out a full remediation strategy and built 14 bespoke, mixed-tenure homes, the area was significantly enhanced.


Investors' role in the bounce-back of the UK's economy

As the UK tentatively begins its recovery in the wake of COVID-19, the housing market’s impact on an economic level is more important than ever. 

For experienced investors - with the appropriate knowledge and risk tolerance - disillusioned with the rock-bottom Cash ISA interest rates, and looking for impact-driven investment opportunities, the property-backed IFISA is an important consideration. 

The alternative finance provided to regional, SME house builders by the property-backed IFISA is crucial in driving forward house building and, in turn, economic growth. 


Carlton Bonds Brochure

The CARLTON Bonds product is available exclusively to experienced investors who are classified as either sophisticated investors, high-net-worth individuals or professional investors and have the knowledge and experience to make their own investment decisions. Investments are high risk and illiquid, your capital is at risk and returns are not guaranteed. Bonds are not protected by the Financial Services Compensation Scheme (FSCS).