Innovative Finance ISA (IFISA) Explained
The Innovative Finance ISA (IFISA) allows you to invest in peer-to-peer (P2P) loans, lending your money directly to individuals or businesses, with all interest earned being tax-free. It's designed for those who want to earn higher returns than a Cash ISA, but without the volatility of stock markets.
It’s less known than a Cash ISA or Stocks & Shares ISA, but it can be a powerful tool for the right investor.
How an IFISA Works
With an IFISA, your money is lent out via peer-to-peer lending platforms. These platforms match investors with borrowers, individuals or businesses, and you earn interest on the loans. This interest is completely tax-free when held inside an IFISA.
Popular platforms include Kuflink, Loanpad, and CrowdProperty, each offering different lending models and risk profiles.
What Can You Invest In?
Depending on the platform, you can invest in:
- Property-backed loans
- Small business lending
- Consumer credit
- Asset-backed finance
Example IFISA Platforms
| Platform | Target Returns | Minimum Investment | Notable Features |
|---|---|---|---|
| Kuflink | Up to 9% | £100 | Property-backed, auto or manual invest options |
| Loanpad | 4–5% | £10 | Daily access, lower risk property lending |
| CrowdProperty | Up to 8% | £500 | UK property development loans, hands-off |
ISA Allowance for 2025/26
You can invest up to £20,000 in total across all your ISAs in the 2025/26 tax year. That includes Cash ISAs, Stocks & Shares ISAs, Lifetime ISAs, and IFISAs, but you can only pay into one of each type per year.
IFISA vs Other ISA Types
| Feature | IFISA | Cash ISA | Stocks & Shares ISA |
|---|---|---|---|
| Risk Level | Medium–High | Low | Medium–High |
| Potential Returns | 4–8% | 2–4% | Variable |
| FSCS Protection | No | Yes | No |
| Liquidity | Limited | Easy Access (if flexible) | Depends on platform |
What Are the Risks?
- Your capital is at risk — borrowers may default
- IFISAs are not covered by the Financial Services Compensation Scheme (FSCS)
- Withdrawals may be slow — liquidity depends on resale markets or borrower repayments
- Returns are not guaranteed and may vary between platforms
What Are the Potential Rewards?
Returns of 4% to 8% are common depending on the platform and the risk level. These returns are net of tax, which can significantly boost performance compared to regular savings accounts or basic investments.
Who Should Consider an IFISA?
An IFISA may be suitable for you if:
- You’re comfortable with risk and capital being tied up
- You want to diversify outside of cash and stocks
- You’re looking for tax-free income with higher yield potential
- You’re an experienced investor or willing to research platforms carefully
If you're just starting out or want lower-risk savings, you might prefer a Cash ISA or Stocks & Shares ISA.
Frequently Asked Questions
Are IFISAs safe?
They’re riskier than Cash ISAs and are not FSCS protected. Your returns depend on borrowers repaying their loans in full and on time.
Can I lose money in an IFISA?
Yes, if borrowers default or the platform experiences losses, you could get back less than you invested.
Can I transfer other ISAs into an IFISA?
Yes, you can transfer existing ISAs into an IFISA — just make sure to request a formal ISA transfer to retain tax benefits.
How do I open an IFISA?
Choose a platform that offers an IFISA, create an account, and select eligible investments within your ISA allowance.