Transfer money from ISA to Zopa

philaldhous

Hello,

I currently have a fixed rate ISA with Virgin Money due to mature in 2017. I would like to move half of the money from here to a Zopa loans account.

Currently im confused by what penalties I will incur. There is advise not to withdraw money and then put it back in an ISA , should always transfer, but Zopa is not an ISA.
How does it affect my tax free allowance for the year?

Im currently a student so my income is effectively £0.

Thanks for any help

bigadaj

philaldhous wrote: »

Hello,

I currently have a fixed rate ISA with Virgin Money due to mature in 2017. I would like to move half of the money from here to a Zopa loans account.

Currently im confused by what penalties I will incur. There is advise not to withdraw money and then put it back in an ISA , should always transfer, but Zopa is not an ISA.
How does it affect my tax free allowance for the year?

Im currently a student so my income is effectively £0.

Thanks for any help

So if you withdraw before the end of the fixed term period you will be subject to the penalties detailed in your agreement, you'd need to read this to determine how much they might be.

If you withdraw money from a previous years isa then you lose that allowance, however you have an allowance of £15240 this tax year and £20000 next year so that might not be a problem.

There's bloodily talk of the innovative finance isas being developed but these are slow to develop, if you have no income then the tax benefits of isas are limited. You have a personal allowance of £11k and a £1k savings allowance so there's not much advantage to isas for you as things stand.

I'm not a fan of Zopa, poor returns, unclear risk and better options out there in my opinion.

Eco_Miser

With an income of effectively £0, you could earn nearly £17,000 (£5,000 0% Starting Rate, as well as PA and PSA) interest before needing to pay tax, so the tax-sheltering properties of an ISA are of no use to you.

ERICS_MUM

Is Zopa a peer to peer company ? If so, would your money be 'safe', ie covered under the Financial Services Compensation Scheme ?

I'm no expert so forgive me if I'm talking rubbish but I think it's worth checking before you part with your hard-earned cash,

bigadaj

ERICS_MUM wrote: »

Is Zopa a peer to peer company ? If so, would your money be 'safe', ie covered under the Financial Services Compensation Scheme ?

I'm no expert so forgive me if I'm talking rubbish but I think it's worth checking before you part with your hard-earned cash,

Zopa is p2p lender, in fact the oldest and largest. It is fca regulated but doesn't fall under fscs guarantees, so capital is at risk.

I'm not a fan of Zopa as returns aren't particularly high and the mending is generally unsecured; there are alternatives that pay two or three times or more the return of Zopa, generally secured by a charge on property, assets or other capital.

jamesd

if you are willing to pay whatever penalty Virgin applies then you can do the transfer to an ISA that offers the flexible ISA feature. You'll need to transfer all current year money at a minimum. You can then use the flexible ISA feature to withdraw the money from the ISA and invest in P2P.

A place like MoneyThing is better suited to your time need because there is no penalty to exit so you can wither go for loans that will end before the end of the tax year or look to sell. Then you can exit fro P2P in time to redepost it into the flexible ISA and not lose the ISA wrapper.

Or you might not have enough money for the ISA annual allowance to limit you and you might not care about redepositing it within the tax year in which you flexibly withdrew it.

ERICS_MUM

The fact that money held with Zopa isn't covered by the FSCS would absolutely rule them out for me, regardless of how great the potential return. I'd rather keep my capital safe and earn less interest than risk the capital.

I'm a cautious soul !!

AndyT678

ERICS_MUM wrote: »

I'd rather keep my capital safe and earn less interest than risk the capital.

But you could start now with enough money to buy a new car and keep your capital safe for the next 40 years, assiduously compounding the interest only to find that you eventually end up with enough money to buy a mars bar. Is that a risk that you're comfortable with?

bigadaj

ERICS_MUM wrote: »

The fact that money held with Zopa isn't covered by the FSCS would absolutely rule them out for me, regardless of how great the potential return. I'd rather keep my capital safe and earn less interest than risk the capital.

I'm a cautious soul !!

We're at an odd time in economic terms. There probably hasn't been a time in history where there is a larger risk in both shortfall and inflation to long term economic well being.

It's good to be cautious in terms of risk to capital, but once you've filled the obvious high rate current accounts and regular savers the risks of losses to inflation and underperformance are far greater than that from risk to capital from investments, primarily equities but also things like p2p.

6022tivo

I'm still waiting for the P2P ISA... Hurry up Zopa as I can't be arsed doing a tax return!