The new Innovative Finance ISA is here at last!

Known as the Innovative Finance ISA (IF ISA), but informally referred to as the peer-to-peer (P2P) ISA, the IF ISA allows investors in peer-to-peer loans to shelter their returns free from income tax.

Obviously, this new tax haven is great news for UK investors, but what do we actually know about the IF ISA? Here's a 60-second, 15-point, “just the facts” Q&A guide to this newest entry to the ISA hit parade:

What exactly does the IF ISA do?

It enables UK investors aged 18+ to shelter their profits from investing in peer-to-peer loans (and crowd-funded debt securities), safe from the taxman's grasp.

What are its tax benefits?

When you invest inside an IF ISA, you pay no income tax on your P2P interest income (and capital repayments, which are not taxable). This means your gains avoid being taxed at rates ranging from 20% to 45%.

What sort of loans can I buy?

You choose whether to lend to businesses (via secured or unsecured loans) or to individuals (via unsecured loans). At Assetz Capital, we offer only secured business loans to carefully vetted British businesses.

Are P2P loans protected by the FSCS?

No. Although savings accounts are covered by the Financial Services Compensation Scheme (FSCS) -- the government-backed safety-net that protects 100% of the first £75,000 of cash on deposit per person per UK institution -- P2P lending is not covered by the FSCS.

Is my money at risk?

Yes, because P2P lending is investing and not cash savings. As with other investments, your money is not 100% guaranteed and you may get back less than you put in, because of the risk of losses due to bad debts and loan defaults.

Can I use one IF ISA to invest across multiple P2P platforms?

No, you cannot use a single IF ISA to invest across multiple P2P platforms in the same tax year at present but this might change in the future.

How much can I invest in 2016/17?

The maximum investment in an IF ISA (or a Cash ISA or Stocks & Shares ISA) is £15,240 in the 2016/17 tax year.

How much can I invest in 2017/18?

More good news: the maximum investment into an IF ISA leaps to £20,000 a year from now.

What is the minimum investment into an IF ISA?

The minimum investment into an IF ISA varies from one platform to another, but is a mere £1 for all Assetz Capital accounts. As an added bonus, Assetz Capital doesn't charge its P2P lenders any fees at all.

Can I transfer cash into an IF ISA from existing ISAs?

Yes, you can transfer sums from existing Cash ISAs and Stocks & Shares ISAs from past and present years into a new IF ISA. To avoid losing previous ISA allowances, these cash transfers must be arranged directly between your ISA providers.

What returns can I expect?

Lender interest rates vary widely across P2P platforms and range from under 4% a year to over 20% a year (before tax, loan losses and any fees and depending on borrowers' riskiness and credit ratings). However, most P2P-lending rates are typically between 4% and 8% a year (before tax, fees and loan losses).

At Assetz Capital, our gross returns (before allowances for any loan losses not covered by a provision fund or for any tax payable on loans held outside of an IF ISA) range from 3.75% a year for our Quick Access Account (QAA) to 7% a year for our Great British Business Account (GBBA) and Green Energy Income Account (GEIA) and from 6.5% to 18% a year for our Manual Loan Investment Account (MLIA).

Should I pick my own P2P loans for my IF ISA?

If you're already an experienced P2P lender, then you can hand-pick your own loans via our Manual Loan Investment Account (MLIA). This offers lender interest rates ranging from 6.5% to 18% a year (before tax and any loan losses).

On the other hand, if you're a newcomer to P2P investing, you may wish to try investing in accounts that spread your risk by 'auto-lending' or 'auto-picking' loans to multiple borrowers on your behalf, based on criteria chosen by you. At Assetz Capital, we have three such auto-diversifying accounts: our Quick Access Account (QAA), our Great British Business Account (GBBA) and our Green Energy Income Account (GEIA).

How do I spread my risk?

First, you can spread your risk by lending to a wide and diverse group of borrowers. Doing this will avoid concentrating your lending funds among too few borrowers.

Second, you can 'blend as you lend' by investing in a mixture of (safer) low-rate and (riskier) high-rate loans.

Third, to reduce your duration risk, you can invest over a range of different time periods. As Assetz Capital, we offer P2P loans with durations ranging from one month to five years.

Is my IF ISA protected in any other way?

Many P2P providers offer accounts protected by inbuilt safety-nets, known as loss-provision funds. These backstops -- typically funded by additional borrower interest and fees -- aim to absorb predicted loan losses and reduce lenders' losses. At Assetz Capital, our QAA, GBBA and GEIA are each backed by discretionary, ring-fenced provision funds that help to lessen bad debts and loan defaults.

What can I do with my income and capital repayments?

Of course, you can choose to withdraw these sums as and when they arrive in your IF ISA. However, reinvesting your interest income and capital repayments into yet more P2P loans will boost your future ISA returns. With Assetz Capital, you can automatically choose to reinvest interest income and capital repayments via the easy-to-use options on your personal Loan Dashboard.

Stuart Law, co-founder and CEO of Assetz Capital, comments, "Wednesday, 6 April 2016 was a landmark day for the UK's rapidly growing peer-to-peer lenders. We at Assetz Capital are braced for a spike in demand as P2P investors put their spare cash into IFISAs for the very first time. If you're keen to open an IFISA, please call us on (020) 7870 1023 or email us at invest@assetzcapital.co.uk and we'll be thrilled to help!"

RISK WARNING: "As with most forms of investment, peer-to-peer lending carries a degree of risk to your capital; in this case, if borrowers were unable to repay their loans. At Assetz Capital, we seek to reduce this risk to our investors by taking asset security on every loan, with the added benefit of a discretionary Provision Fund for some of our investment accounts."

- April 18, 2016