Peer to peer ISA FAQs

An Innovative Finance ISA (IFISA) is a type of ISA that lets you hold peer-to-peer loans and earn the interest free of UK income tax, within your annual ISA allowance. It is an investment, not a savings account.

No, not in the way a cash ISA is. Your capital is at risk, returns are not guaranteed, and the money is not protected against loss by the FSCS. If borrowers don't repay, you can lose money. Features like security on loans and diversification reduce but do not remove that risk.

The Financial Services Compensation Scheme does not cover losses from P2P loans defaulting. It protects eligible cash deposits up to £85,000 per bank, which is what a cash ISA enjoys, but not the performance of peer-to-peer investments.

Interest earned inside an IFISA is free of UK income tax, for as long as the money stays within the ISA wrapper. That tax treatment is the main benefit of the wrapper; it does not change the underlying investment risk.

Your ISA allowance for the 2026/27 tax year is £20,000 in total across all ISA types. You can put all of it into an IFISA, or split it across cash, stocks and shares, Lifetime and Innovative Finance ISAs in any proportion.

Yes. Since April 2024 you can pay into more than one ISA of the same type, and across different types, in the same tax year, as long as your total subscriptions stay within the £20,000 allowance.

Usually yes. Use your new provider's official ISA transfer process rather than withdrawing the money yourself, which keeps the tax-free status and does not use up this year's allowance. Some platforms only accept transfers from existing customers, so check first.

Platforms typically advertise target rates in the region of 4% to 9%, but these are targets, not guarantees. Your actual return depends on borrowers repaying and is reduced by any bad debt and fees.

Yes. If borrowers default and the security (if any) does not cover the debt, you can lose part or all of your investment. There is no FSCS safety net for those losses.

P2P loans usually run for a fixed term, so your capital is committed until they repay. Some platforms offer a secondary market to sell loan parts early, but only if another investor wants to buy them, which is not guaranteed, especially in stressed conditions.

FCA-authorised platforms must keep a wind-down plan so existing loans continue to be administered if the platform fails. Loans are typically ring-fenced from the platform's own business. In practice this can still mean long delays and reduced recoveries, and the FSCS does not make up losses.

Generally any UK resident aged 18 or over. Some platforms restrict access further, for example only accepting investors who certify as high-net-worth or sophisticated, so eligibility varies by provider.