Answers · UK 2025/26

How does an Innovative Finance ISA (IFISA) work?

An Innovative Finance ISA (IFISA) lets you hold peer-to-peer loans and some crowdfunding debt securities within a tax-free wrapper, sharing the same £20,000 annual ISA allowance as cash and stocks and shares ISAs. Returns can be higher than cash savings but capital is at risk and is not covered by the Financial Services Compensation Scheme in the same way as a bank deposit.

Last updated: 1 July 2026Last reviewed: 1 July 2026How we verify

Full answer

An Innovative Finance ISA (IFISA) is one of the four main types of ISA available in the UK (alongside Cash, Stocks and Shares, and Lifetime ISA), designed to hold peer-to-peer (P2P) lending investments and certain debt-based crowdfunding securities inside a tax-free wrapper. **What can go in an IFISA** - Peer-to-peer loans arranged through FCA-authorised P2P platforms - Some debt securities offered via crowdfunding platforms - Certain innovative finance investments, such as mini-bonds where eligible Stocks and shares (equity crowdfunding) do not qualify for an IFISA -- they belong in a Stocks and Shares ISA instead. **Shared £20,000 allowance** The IFISA shares the standard £20,000 annual ISA allowance for 2026/27 with any Cash ISA, Stocks and Shares ISA, and Lifetime ISA contributions you make in the same tax year. You can split the £20,000 across multiple ISA types in any combination you choose, and since April 2024 you can also pay into more than one ISA of the same type in a tax year. **Tax treatment** Interest and returns earned within an IFISA are completely free of Income Tax and Capital Gains Tax, exactly as with other ISA types -- attractive because P2P returns would otherwise be taxed as savings income at your marginal rate. **Key risk warning** Unlike a Cash ISA, money in an IFISA is NOT protected by the Financial Services Compensation Scheme (FSCS) £85,000 deposit protection. If a borrower defaults or the P2P platform itself fails, you could lose some or all of your capital. Some platforms offer their own provision funds or contingency funds, but these are not guaranteed and are not FSCS-backed in the way bank deposits are. **Typical returns** Advertised target returns on P2P lending platforms are often quoted in the range of 4% to 8%+ per year, reflecting the higher risk compared with cash savings, though actual returns depend heavily on borrower default rates and platform performance, and are not guaranteed. **Who it suits** An IFISA suits investors comfortable taking on credit risk for potentially higher returns than cash, typically as a smaller part of a diversified portfolio rather than where their full capital-safe savings would be held.