Cash ISAs are more popular than stocks and shares ISAs because there’s no risk to your money. Cash ISAs are the same as any standard savings account except they are tax free for a limited annual amount of saving. For the tax year 2017-18 you can put up to £20,000 into a cash ISA, a stocks and shares ISA, an innovative finance ISA, or a combination of the three, if you’re a UK resident aged 16 or over.
The specialist ethical providers Triodos and Charity Bank both offered competitive cash ISA rates in March 2018. For example, Charity Bank was offering a 33-day notice ethical ISA paying 1.7% annually at the time of writing. Triodos was offering 1.05%.
For comparison, Nationwide, a big mainstream building society, was only paying 0.75% but withdrawals could be made without notice.
Innovative Finance ISAs
An innovative finance ISA – sometimes called an IFISA – is an ISA that contains peer-to-peer loans instead of cash in a bank or stocks and shares in companies. They were introduced in 2016 to make it easier to invest tax free with a wider range of providers.
Peer-to-peer lending matches up investors, who are willing to lend, with borrowers, who could be individuals, businesses, or property developers.
Triodos and Abundance both offer IFISAs. Triodos is currently offering three IFISAs in renewable energy projects and a charity, with interest rates of 5-7% and terms of between 5 and 17 years. Abundance invests in green energy projects at a rate of 6-8% over 3-5 years.
See our article on Crowdfunding for more details.
Stocks and shares ISAs
These investment type ISAs can be linked to ethical funds, see our dedicated guide.
Ease of moving accounts
Government efforts to promote competition in the sector mean that it’s pretty easy to move your whole Cash ISA to a more ethical provider should you choose. In theory it should take no more than 15 days, but you should follow advice on how to do it without losing its tax free status. Contacting the new provider is usually the best place to start.
