What is an Innovative Finance ISA?

Written by
Eszter Z.
Fact checked by
Adam N.
Jan 2024

If you reside in the UK, Individual Savings Accounts (ISAs) are a great way to grow your savings tax-free. A special type of ISAs, the Innovative finance ISAs (IFISAs) help you earn tax-free interest through peer-to-peer lending with potentially higher returns, but also involve considerably higher risks than other types of ISAs

In this guide, we have put together the key points on IFISAs to help you decide if they could be for you.


  • Innovative Finance ISAs are a type of individual savings account available to adults who reside in the UK 
  • Innovative Finance ISAs involve peer-to-peer lending, which could mean higher interest rates but higher risk as well
  • They are not covered by the UK’s Financial Services Compensation Scheme (FSCS)  so your investments might not be protected

How do Innovative Finance ISAs work?

Innovative finance ISAs are individual savings accounts that allow UK residents to invest in peer-to-peer (P2P) lending through online portals that match investors with borrowers – individuals and businesses –, while still enjoying the tax benefits that come with an ISA. Investors do not pay taxes on the interest earned. 

Peer-to-peer (P2P) lending, also known as social lending or crowd lending, enables individuals to lend or borrow money directly from other individuals, cutting out the financial institution, such as a bank. Different online platforms link the potential investor with the borrowers without including a bank or another financial institution. The platforms enable the terms and the rates and facilitate transactions. P2P lending might be attractive to investors who are interested in higher returns and are not worried about P2P loans having a higher default rate than traditional loans. 

How safe are Innovative Finance ISAs?

Returns on Innovative Finance ISAs can vary widely, and some IFISAs offer higher returns than traditional savings accounts, but they also come at a higher risk. 

Innovative Finance ISAs are not covered by the UK’s Financial Services Compensation Scheme (FSCS) which means that if the platform goes belly up, the investors' money may not be protected. Some platforms offer contingency funds, but it is not a guarantee that you will get your money back. P2P platforms are overseen by the UK’s financial regulatory body, the Financial Conduct Authority (FCA), so the best is to check on the FCA website if the platform you are considering using is authorized by the FCA. 

Another drawback of IFISAs is that withdrawal can be slow. Depending on the platform you use, you might have to wait months before accessing your money. Check also if there are management costs at the P2P portal you are considering using, and dig into the portal’s record for safety.

How much money can I put into Innovative Finance ISAs?

If you really want to try IFISAs, consider using only a part of your ISA annual allowance: you can split the £20,000 available in one tax year and invest it in different types of ISAs. Also, consider spreading your investments among different platforms and borrowers for a diversified portfolio. 

However, if you want, as with other ISAs, you’re allowed to pay your full ISA allowance – £20,000 for one tax year – into your Innovative Finance ISA.

Don't forget, the tax year in the UK runs from April 6 to April 5!

What other ISAs are there?

Let’s recap what other ISAs are available for UK residents: 

Type of ISA What is it?  Age Main features
Cash ISA Savings account 16+ £20,000 annual allowance. Tax-free interest.
Lifetime ISA House deposit and/or retirement savings account 18-39 £4,000 annual allowance with 25% top-up. Tax-free interest.
Junior ISA Savings account Under 18 £9,000 annual allowance. Tax-free interest.
Stocks and Shares ISA Investment account 18+ £20,000 annual allowance. Tax-free gains, dividends and interest.
Innovative Finance ISA P2P lending investment 18+ £20,000 annual allowance. P2P lending and tax-free interest.

For further details, check out our detailed guide on ISAs!

Being financially independent and conscious is very important, so well done on embarking on that journey! With the help of our skilled team and their innovative methodology, we are able to assess brokers and create a list of the best options for opening an ISA account.

We at BrokerChooser want to help you make sense of a complicated financial world. If you have any questions or suggestions, head over to the BrokerChooser Community page!

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Author of this article

Eszter Zalán
Eszter Zalán

Eszter is a former Editor and Financial Journalist for BrokerChooser. She wrote and edited BrokerChooser's content from 2021 onwards, bringing her more than a decade-long experience in journalism to the team. She has covered world affairs and several financial crises, and dove deep into SEO and coding to make BrokerChooser's content more accessible to users.

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.

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