Kuflink Innovative Finance ISA

A Kuflink Innovative Finance ISA is a tax-free wrapper around peer-to-peer lending. Rather than holding cash or funds, your money is lent out to borrowers, and Kuflink's lending is secured on UK property. Kuflink has been approved by HMRC as an ISA manager since May 2017, and its IFISA has a minimum deposit of £500, with 1, 2 or 3-year terms¹.

The important thing to understand before anything else is what this is not. Kuflink states that capital is at risk and that it is not protected by the Financial Services Compensation Scheme¹. Holding your investment in an IFISA does not reduce the risks associated with peer-to-peer agreements³. If borrowers fail to repay, you can lose money, and there is no compensation scheme standing behind the loan book.

This page covers what the Kuflink IFISA is, how the lending works, what it costs, who can open one, how to move an existing ISA across, and what happens if something goes wrong. Kuflink's own site carries today's rates and terms.

What it is and who it is for

An Innovative Finance ISA is a tax-free account that holds peer-to-peer lending agreements. Which? describes the wrapper as most commonly used for peer-to-peer lending, which matches up investors with borrowers, who could be individuals, businesses, or property developers⁵. Kuflink's version lends against property, and the platform describes the underlying investment as loans secured on property⁶.

Kuflink runs two products: Select Invest and Select IF-ISA⁷. The IFISA is available to new investors and to those wishing to transfer in funds from elsewhere, with the option to invest up to £20,000 per annum tax-free¹. Interest is paid annually and Kuflink does not charge platform or investment fees on the IF-ISA¹.

The audience this suits, by circumstance rather than by merit, is someone who already holds an ISA elsewhere and wants property-backed lending inside a tax wrapper, who can leave the money alone for a fixed term, and who can absorb the loss of part or all of the capital. It is not a savings account substitute. Kuflink's own risk warning states that it no longer absorbs investor losses, no longer contributes first-loss capital, no longer tops up interest, and no longer pays interest on defaulted loans⁸. Those protections existed in the past and have been removed, which changes what a new investor is exposed to compared with earlier years.

Anyone who needs access to the money at short notice, or who would be damaged by losing it, is in the wrong product. The term structure and the secondary market rules both point the same way.

How it works

Money you put into the IFISA is lent to borrowers, and you hold loan parts. Kuflink's platform offers Select Invest, where you choose individual loans, and Auto Invest, which spreads your money across loans automatically and can be held as an IF-ISA⁹. The IFISA sits inside your Kuflink account alongside your other holdings, and the portfolio section shows Invest, Auto Invest and IFISA separately¹¹.

Interest is calculated from midnight to midnight, with the daily rate being the monthly rate divided by the number of days in that month, and simple interest applied unless stated otherwise⁴. If you invest in a term longer than one year, interest is compounded annually on the last day of the year term unless you opt out⁴. Interest is paid into your applicable wallet during the month in which your investment term ends, or added to your capital if you roll the investment over¹.

At maturity, if you take no action, your capital and interest are automatically re-termed for an additional one-year period, and you have 30 calendar days from renewal to reverse or modify that⁴. Kuflink notifies you by email or phone before maturity⁴.

A balance transfer moves the debt, not the interest rate

Transfers in and out of the Kuflink IFISA follow different rules, and the difference matters more than the fee.

Transferring in is straightforward. Kuflink accepts ISA transfers in, and you can transfer in funds from another provider⁶. You read and agree to the ISA declaration, provide your National Insurance number, download, complete and sign the transfer form, then post the signed form to Kuflink¹². Kuflink sends the transfer request to your existing ISA provider within five business days of receipt⁴. Transfer Authority Forms are valid for six months after the day they are signed⁴. Once your existing provider has the completed form, it has 15 working days to transfer the ISA to Kuflink¹².

Transferring out is more restricted. You can only transfer your Kuflink IF-ISA at maturity of the term of your investment, and loans cannot be liquidated early to fund a transfer out⁴. To start it, you instruct the receiving ISA provider, who sends the request to Kuflink¹³. The process is: create an account with the new provider, request an ISA transfer form from them, complete it online or by post, enter the Kuflink Unique Transaction Reference Number on the form, and return it to the new provider, who coordinates with Kuflink¹⁴. Kuflink says it can take up to 30 calendar days, set by HMRC, to transfer an ISA out¹⁴.

If you are no longer a UK resident for tax purposes, you can keep an existing IF-ISA open and still get UK tax relief on the money and investments held in it, and you can transfer an IF-ISA to another provider even if you are not a resident in the UK¹⁵.

How the fees and charges work

The headline position is that Kuflink does not charge platform or investment fees on the IF-ISA, and it pays interest annually¹. It also states that it will not charge you any fees for creating an Investor Account or lending through the platform⁴.

The charges that do exist sit around the edges of the product.

Two further points on cost. Second, if you cancel your IF-ISA investment within the 14-day cooling-off period, no fee is levied, but a fee is charged for liquidation after that period⁴. There is no 14-day cooling-off period on secondary market transactions⁴.

Who can apply and how to apply

Eligibility is set out in Kuflink's terms. You must be a permanent resident of the UK, excluding the Channel Islands and the Isle of Man, and qualify for an ISA under HMRC requirements, and you must be at least 18 years old⁴. Kuflink's product page puts it slightly differently: you must be a resident in the UK, or a Crown servant such as a diplomatic or overseas civil servant, or their spouse or civil partner if you do not live in the UK¹. The minimum age for a stocks and shares or Innovative Finance ISA is 18 or over¹.

The minimum is £500 to get started, and each subscription must be at least £500¹. The maximum you can subscribe to the Kuflink IF-ISA is the maximum ISA limit per tax year as prescribed in the ISA Regulations⁴. Kuflink's IFISA is flexible for current tax year funds only, and the ISA subscription limit applies to the total of your investments and funds held in your Current Tax Year wallet¹⁸.

To open an account: click the signup button on the homepage, enter your personal details, complete the appropriateness test, add your bank details, then select a product to start investing¹⁹. The appropriateness test is a regulatory requirement for peer-to-peer investing, and Kuflink publishes a guide to it²⁰. If you do not have the relevant ID, or your passport has expired, you can send documents by contacting Kuflink via hello@kuflink.com or online chat²².

How your money is protected

This is the section to read twice.

Kuflink states that capital is at risk and that it is not protected by the FSCS¹. Investing via the Kuflink platform is different from having a savings account, and your investments are not covered by the Financial Services Compensation Scheme²³. Lending through the platform is not covered under the FSCS⁴. Kuflink also warns that you may not be able to access your money easily and are unlikely to be protected if something goes wrong²⁴.

There is one narrow protection. Funds sitting in your Kuflink wallet, before they are invested, are covered by FCA Client Money Rules and held in a segregated client account with NatWest Bank Plc, for individual and corporate investors³. Kuflink describes this as covered by FCA CASS (Client Assets Sourcebook) Client Money Rules with no capped limit¹⁰. Corporate funds held by Kuflink have been treated as client money under CASS 7 Rules since 21 April 2022⁴. But Kuflink is explicit that your investments via the platform are not covered by CASS¹⁶. The wallet protection covers money in transit, not money lent out.

The lending itself is secured on UK property, and Kuflink describes the security as a fixed charge, such as property, and/or a floating charge¹. Security is not a guarantee: if a borrower defaults and the property does not recover enough on sale, the shortfall falls on lenders.

If Kuflink were to wind down, it says it would continue to operate as an ISA manager but would cease to accept new ISA investments¹⁰. That means existing investments would be administered rather than returned on demand.

Getting your money out early

The secondary market is the only route to exit before maturity, and it is limited. Only Select Invest IFISA loan parts may be sold on Kuflink's Secondary Market; Auto and Auto-IFISA, Buy to let and Buy to let IF-ISA, and SIPP Pool loan parts cannot be sold there²⁶. Sales on the marketplace are not guaranteed¹⁷.

Where a sale is possible, loans are sold at par value and lenders cannot apply a premium or discount to the outstanding value¹⁶. Kuflink has up to 24 hours to review a listing and then reject it or list it¹⁶. You cannot list a loan part that is in default, in arrears or pending a status update³. Investors are not permitted to sell during the first month or the last month of any loan term⁴. Employees of Kuflink and their close family and friends are not permitted to sell within the first 48 hours of the secondary market opening for any particular opportunity⁴.

Withdrawals carry a tax-wrapper consequence too. Any withdrawals or capital losses may count toward your ISA allowance¹⁶. If you withdraw funds that have been repaid to your IF-ISA Previous wallet, those funds are removed from the ISA wrapper and lose their tax advantages⁴.

Problems, complaints and getting help

Complaints go to Kuflink first. Its terms give the contact details as email hello@kuflink.com or telephone 01474 334 488⁴. Its complaints page says all complaints should be made in writing to Kuflink, 21 West Street, DA11 0BF or complaints@kuflink.com²⁷. Kuflink complaints can also be raised through Resolver²⁸.

If you are unhappy with the response, the Financial Ombudsman Service handles complaints about investments, including ISAs, and publishes guidance for businesses on complaints about ISAs²⁹. The service helps resolve complaints about issues such as account closures, disputed transactions, IT failures, and problems with switching services³⁰. You can visit the Financial Ombudsman Service website to make a complaint or call 0300 123 9123³¹.

Resolver covers two issue types for Kuflink specifically: excessive fees, and being unable to access funds²⁸. Both are worth knowing about before you invest, because they describe the two things investors most often find frustrating about peer-to-peer products: charges that were not obvious at the outset, and money that cannot be reached when it is wanted.

For free, impartial help with wider money problems, MoneyHelper and the debt advice charities provide guidance, and Business Debtline offers free advice if you are struggling³³. If a complaint relates to a claims management company rather than Kuflink itself, the Financial Conduct Authority takes complaints about the conduct of a claims company, and the Financial Ombudsman Service can look at the service you received from one, including the results of your claim or the fees charged³⁴.