peer 2 peer vs ISA

sarahchall

Hi
I have a peer to peer account where I get more interest than an in my isa. I have similar amounts in both. Should I keep money in p2p or transfer to ISA and lose out on interest? Any advice appreciated.
Thanks
Sarah

Jonbvn

Why not do both?

TakeCareOfThePennies_2

sarahchall wrote: »

Should I keep money in p2p or transfer to ISA and lose out on interest?

Just remember Sarah, there is a reason for the inflated interest rates on P2P.

And no, the answer is not "because they can afford to".

Its not the silver bullet you think it is.

bowlhead99

If your financial situation means you can't usually fill all your £15000 ISA allowance every tax year, there is probably no big deal not using the allowance this year and just letting it lapse instead, and contributing into ISAs in later years instead.

If you want to use up this tax year's ISA allowance then you don't need to do it until 5 April 2016. So, no hurry to transfer right this minute. Obviously if you plan to do this, don't commit to more P2P lending with a term of more than 11 months.

The decision to take the long-term tax benefits of ISAs over the short term better interest rate is the same for any competing product - high interest current accounts, P2P accounts and so on. The 2015/16 ISA tax wrapper might not be something that's of use to you if you are happy with the alternatives this year and can use your 2016/17 ISA allowance to hide the money from the taxman then instead.

TCOTP is right that P2P has more risk than a cash ISA, or any other bank or building society savings or current account for that matter. So you need more return, to compensate for the risk. If you're happy with the risk, that's fine.

So there are two things to consider - whether you want/need the tax exemption instead of a short term apparently higher rate ; and whether you want/need the extra risk of P2P to get higher returns compared to the other taxable or non-taxable bank or building society accounts that are guaranteed and insured.