ACT NOW TO GET A BETTER RETURN ON YOUR MONEY

TIME is running out if you want to take advantage of a new type of Isa that aims to pay tax-free income of around 7.3 per cent a year.

The April 5 deadline for using your annual £20,000 Isa allowance is just days away and now you have a potentially more rewarding alternative to the cash Isa.

Money&Co’s Innovative Finance Isa gives savers access to the higher yields available from peer-to-peer (P2P) lending platforms.

Renowned fund manager Nicola Horlick, who is behind the Isa, said Money&Co can help savers escape the low interest rate trap.

“Britons hold an incredible £270 billion in cash Isas, often earning next to no interest. Why put up with such a poor return when you can get much more elsewhere?”

Your yield will be paid directly into your Money&Co account, which can then be transferred into a bank account, or you can choose to reinvest for further growth.

You can invest your full £20,000 Isa allowance with Money&Co, or start with smaller sums.

You can still save in a traditional cash or stocks and shares Isa as well, provided you do not exceed your overall annual allowance.

Any money you hold in cash or stocks and shares Isa you have taken out in previous years can also be transferred, quickly and easily.

As a P2P platform, Money&Co lends your money to established businesses that are looking to borrow money to fund their expansion.

This means the yield is not guaranteed and your capital is at risk.

P2P lending is not protected by the Financial Services Compensation Scheme (FSCS) but Horlick said Money&Co has introduced stringent safeguards.

“All companies we lend money to must have been trading for at least three years and be making a profit,” she explained, adding that they have been carefully selected by Money&Co’s head of credit and must pass strict criteria.

“We prefer companies with valuable assets such as property or manufacturing equipment that can be used as security in the unlikely event of a default or bad debt.”

Money&Co is fully regulated by the Financial Conduct Authority and has been lending since April 2014, with no bad debts to date and minimal defaults. You can select which companies you lend to, and to help guide your choice Money&Co gives each of them a credit rating, based on the level of risk.

There are five credit ratings, ranging from A+ for the safest to C+ for the most risky.

An A+ loan is likely to yield around 7 per cent, but with a little more risk you could get as much as 9 or 10 per cent.

The average yield across all Money&Co loans is 8.6 per cent, minus annual charges of 1 per cent.

The April 5 end of tax year deadline is just days away – so time is running out if you want to try something really innovative.