Last reviewed May 2026 · by Gareth Hoyle
What is a peer to peer ISA?
Gareth Hoyle · Founder & Editor
Reviewed May 2026. Independent researcher, not a financial adviser. About Gareth
A peer to peer ISA is the everyday name for an Innovative Finance ISA (IFISA), a type of ISA introduced by the UK government in April 2016. Instead of holding cash or stocks and shares, it holds peer-to-peer (P2P) loans. You lend your money, through an FCA-regulated online platform, to borrowers such as small businesses, property developers or individuals. They pay interest, and because the loans sit inside an ISA wrapper, that interest is free of UK income tax.
How does a peer to peer ISA work?
The mechanics are simpler than they sound. You open an IFISA with a provider, add money (up to your annual allowance), and that money is lent out to borrowers, either chosen by you or automatically spread across many loans. As borrowers repay, you receive your capital back plus interest, tax-free, which you can withdraw or reinvest.
Most providers focus on a particular kind of lending. Some lend against UK property with a legal charge as security; others fund small businesses, commercial property, or even education. The type of lending drives both the target return and the risk profile.
What are the risks?
This is the part the glossy adverts gloss over, so we'll be blunt. P2P lending is a high-risk investment:
- Borrowers can default. If a loan isn't repaid, you can lose some or all of that money.
- Platforms can fail. If the provider itself goes out of business, recovering your money can be slow and incomplete.
- No FSCS protection. Unlike cash in a bank, P2P lending is not covered by the Financial Services Compensation Scheme.
- Limited access. Your money is tied up in loans. You may not be able to withdraw quickly, especially if a secondary market dries up.
Who might it suit?
An IFISA is generally only worth considering for people who already have an emergency fund and diversified savings, who understand they could lose money, and who want to use their tax-free allowance on a higher-risk, income-focused investment. It is not a savings account and should never be confused with one.
Ready to see how the platforms stack up? Our provider comparison lays out target rates, minimums and security side by side, and our review methodology explains exactly how we assess each one.
Common questions
What is a peer to peer ISA?
A peer to peer ISA, officially an Innovative Finance ISA (IFISA), is a tax-free wrapper that holds peer-to-peer loans instead of cash or shares. You lend money to borrowers through an FCA-regulated platform and any interest you earn is free of UK tax.
Are peer to peer ISAs safe?
No investment is 'safe'. P2P lending is high-risk: your capital is at risk if borrowers default or a platform fails, it is not covered by the FSCS, and you may not be able to withdraw quickly. Target returns are never guaranteed.
How much can I put in an IFISA?
You can pay in up to your £20,000 annual ISA allowance for the 2026/27 tax year. This allowance can be split across different ISA types, and you can transfer existing ISA money in without it counting towards the limit.
Gareth Hoyle is not authorised or regulated by the Financial Conduct Authority and does not provide regulated financial advice. This website provides general information and comparison only. This guide is general information and comparison only. Always read each provider's Key Investor Information and consider professional advice before investing.
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Independent side-by-side comparison of UK IFISA providers: target rates, minimums, security and transfers.
Provider reviews
Independent, risk-first reviews of UK IFISA providers.
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Kuflink's property-secured IFISA reviewed: rates, minimums, security and risks.
Assetz Capital review
Assetz Capital's SME and property lending IFISA reviewed.
Loanpad review
Loanpad's lower-risk senior-lending IFISA reviewed.
CapitalRise review
CapitalRise's prime-property development IFISA reviewed, including who can invest.
Lendwise review
Lendwise's education-finance IFISA reviewed: target rates, unsecured lending and risks.
Guides
Plain-English guides to every type of ISA, how they compare, and how to use them.
Tools
Free calculators and a quiz to help you work out your ISA allowance, projected returns and which ISA fits.
Which ISA is right for me?
Answer a few questions and see which type of ISA tends to fit your goals, timeframe and risk appetite.
ISA allowance calculator
Track how much of your £20,000 ISA allowance you've used across cash, stocks & shares, IFISA and Lifetime ISAs.
Returns calculator
Illustrate how cash, stocks & shares and peer-to-peer ISA returns could differ over time. Illustrative only.
ISA tax-saving calculator
Estimate the tax you'd save by holding P2P or savings interest inside an ISA versus outside it. Illustrative only.
P2P income calculator
Estimate the monthly and annual income a P2P ISA could produce at a given rate, and see how assumed bad debt changes it. Illustrative only.
Platform risk checklist
Work through the due-diligence questions worth asking before you trust any peer-to-peer platform with your money.
Types of ISA explained
The five main types of ISA, how each works, who they suit and how they compare.
The £20,000 ISA allowance
How the annual ISA allowance works, splitting it across ISA types, and the rules that catch people out.
How to transfer an ISA
Step-by-step: how ISA transfers work, why you should never just withdraw, and how to avoid losing tax-free status.
How to open an IFISA
A step-by-step guide to opening an Innovative Finance ISA, what you'll need, and what to check first.
End-of-tax-year ISA checklist
What to do before 5 April to make the most of your ISA allowance before it's gone.
Are IFISAs safe?
What 'safe' really means for an Innovative Finance ISA: capital at risk, no FSCS cover, and what does and doesn't protect you.
FSCS and peer-to-peer
Why P2P loans aren't FSCS-protected, the narrow situations where some protection can apply, and what it means for your money.
If a platform goes bust
Wind-down plans, segregated loans and trustees: what is meant to happen to your money if a P2P platform fails, and the limits of it.
Spotting a risky platform
Warning signs and due-diligence questions to weigh before trusting any P2P platform with your money.
IFISA & P2P glossary
Plain-English definitions of the Innovative Finance ISA and peer-to-peer lending terms you'll meet, from AER to wind-down plan.
IFISA & P2P statistics
Key figures on the UK ISA market and where Innovative Finance ISAs sit within it, with sources and dates.
Peer to peer ISA FAQs
Straight answers to the most common questions about Innovative Finance ISAs: tax, risk, transfers, allowances and access.
P2P ISA vs cash ISA
How an IFISA compares with a cash ISA on returns, risk, access and protection. Capital at risk vs FSCS-protected savings.
P2P ISA vs S&S ISA
Two higher-risk, tax-free options compared: lending vs market investing, returns, risk and access.
Cash ISA vs S&S ISA
The classic decision: guaranteed-rate savings vs investing for growth. How to choose, and why not both.
P2P ISA vs Lifetime ISA
Very different goals: P2P income vs the LISA's 25% government bonus for a first home or retirement.