A beginner’s guide to innovative finance ISAs

A quick introduction to IFISAs

An IFISA lets you invest in peer-to-peer lending and crowdfunding platforms. But unlike GoFundMe, where you're coughing up for someone's "vacation of a lifetime" to Bali in exchange for a poxy keychain, with IFISAs you're investing with the expectation of a solid return – and a tax-free one at that.

Examples of the kinds of projects IFISA investors bankroll include small businesses, property developments, and even renewable energy projects.

These accounts can offer higher returns than stocks & shares ISAs, cash ISAs, and lifetime ISAs, but there’s a catch.

Unlike some ISAs which are protected by the FSCS if the provider goes bust, investments in IFISAs have no such safety net. That means your hard-earned savings would be on the chopping block should it all go wrong.

Currently, there’s a £20,000 limit on what you can contribute across all your ISAs.

You can pay into multiple ISAs of the same type in the same tax year, except for lifetime ISAs.

Here’s a completely arbitrary example of how you could divvy it up, as per ISA rules: 

ISA type	Amount contributed (£)	Remaining balance (£)
Cash ISA	£4,000	£16,000
Stocks & shares ISA	£8,000	£8,000
IFISA	£4,000	£4,000
Lifetime ISA	£4,000	£0
Total	£20,000	£0

In this example, the £20,000 investment is weighted more heavily towards the stocks & shares ISA, with the remainder split evenly among the rest.

However, you can adjust the amounts as you please for your own portfolio, and you don’t have to put in the full £20,000. Indeed, most people don’t manage to max out their ISAs. In fact, as we found out in our 2025 British Savings Report, the average total amount held in ISAs of all types is just £14,000.

Real-world examples of IFISA investments

To provide a clearer picture, here are some types of investments that can be held within an IFISA:

• Renewable energy projects: Some platforms let investors put money into renewable energy projects like community-owned solar farms. These can generate returns, but success depends on the project’s performance and wider market conditions.
• Property development loans: Some platforms connect investors with property developers looking for funding. These loans are usually backed by property, but there is always a risk that a project could fail, leading to losses.
• Small business loans: Some platforms allow investors to lend directly to small businesses. These loans can offer higher interest rates than savings accounts, but businesses may struggle to repay, and there’s no guarantee of getting your money back.

How popular are IFISAs?

In the 2023/2024 financial year – the most recent data available – around 13,000 new IFISA accounts were opened, with a total of £81 million subscribed, according to HMRC data.

While that might not sound like chump change, IFISAs still make up a miniscule fraction of the UK ISA market, representing less than 0.1% of all ISAs.

By contrast, cash ISAs make up around 66% of the market, while stocks & shares ISAs account for 27%. Simply put, IFISAs are barely a blip on the radar.

ISA type	Accounts subscribed 2023/24	Approx. % of total ISAs opened
Cash ISA	9,939,000	66%
Stocks & shares ISA	4,091,000	27%
Lifetime ISA	964,000	6%
IFISA	13,000	<0.1%
Total	~£15 million	100%

After a rise in interest in IFISAs during the pandemic, subscriptions have begun slowing down, with yearly subscription rates either plateuing or dropping ever since.

Our chart below – which uses the same government stats – highlights this trend:

Despite this slowdown, there’s reason to think IFISAs could yet see a resurgence in popularity. That’s because in April 2024 two brand-new types of investments were added to IFISAs.

New investment options in IFISAs

So, what exactly can you hold inside an IFISA?

Until recently, IFISAs were limited to Peer-to-Peer Loans, but since April 2024, they've included two new asset types: Long-Term Asset Funds (LTAFs) and Property Authorised Investment Funds (PAIFs). This marks a significant expansion, giving investors a much wider range of options beyond peer-to-peer lending.

The table below explains the three types of investments you can hold in an IFISA currently:

Asset Type	Example
Peer-to-Peer Loans (P2P)	Lending money to individuals or businesses through online platforms like easyMoney or FOLK2FOLK.
Long-Term Asset Funds (LTAFs)	Investing in funds that hold illiquid assets like infrastructure projects or private equity.
Property Authorised Investment Funds (PAIFs)	Investing in property funds that hold real estate assets, like abrdn PAIF.

Is peer-to-peer lending right for you?

Several platforms have collapsed in recent years.

Lendy, for example, went into administration in 2019, leaving around 20,000 investors with £165 million at risk. That same year, FundingSecure also failed, affecting 3,500 investors with £80 million in loans at stake.

The Financial Conduct Authority (FCA) responded to these failures by imposing stricter advertising and marketing regulations in 2019 to protect rookie investors. These rules mean peer-to-peer platforms can only communicate “direct-offer financial promotions” to retail clients who are classified as high-net-worth or sophisticated investors (FCA).

This rule is in place for good reason, but equally, it doesn’t mean you have to be a financial expert to participate. After all, it’s your money – but let’s spell out the (very real) risks before you do anything too hasty.

• Default risk: With peer-to-peer loans, if a borrower defaults you could lose your investment, although some platforms offer contingency funds to soften the blow. For instance, Lending Works, a UK-based peer-to-peer lending platform, has a safety net called the "Lending Works Shield". This fund steps in to cover missed payments or defaults, aiming to protect lenders against tardiness or defaults. 
• No Financial Services Compensation Scheme (FSCS) protection: Peer-to-peer platforms, even those that provide IFISAs, are not covered by the FSCS. That means, setting aside the question of contingency funds, there’s no safety net if the platform itself goes under.
• Long waits to withdraw: There may also be barriers to accessing your funds, leaving you unable to cash out quickly in an emergency. Take for example easyMoney's IFISA. Investors can request to withdraw their funds at any time; however, the platform states that instant access isn't guaranteed, as the process depends on other investors stumping up to take over your loan parts. 

What platforms offer IFISAs?

The platforms offering IFISAs each have their own focus. Some specialise in property lending, others in business loans, and some provide access to renewable energy projects or other types of alternative finance. Each comes with different features, risks, and potential returns.

However, not all investment platforms qualify to offer IFISAs. While the government now allows IFISAs to include:

• Peer-to-peer loans – lending directly to individuals or businesses
• Long-Term Asset Funds (LTAFs) – funds that invest in assets like infrastructure, private equity, and commercial property
• Property Authorised Investment Funds (PAIFs) – funds focused on real estate investments with certain tax advantages

…only platforms that meet strict rules can offer these investments within an IFISA. If they don’t qualify, you won’t get the tax-free benefits.

Provider	Niche	Open to new retail customers?
ArchOver	Specialises in secured peer-to-peer lending, offering investors the opportunity to lend to UK businesses with a focus on capital preservation.	Not as of 2023.
CrowdProperty	Focuses on property development loans, connecting investors with professional property developers for short-term, secured lending opportunities.	Yes.
CapitalRise	Offers investment opportunities in luxury property development projects, targeting high-net-worth individuals seeking exposure to premium real estate.	Yes – but only certified sophisticated investors or high-net-worth individuals
Housemartin	Provides a platform for investing in secured loans to UK property developers, aiming to deliver attractive returns through short-term property-backed investments.	Yes.
Invest & Fund	Facilitates investments in secured loans to UK businesses, focusing on providing funding solutions to SMEs.	Yes.
Kuflink	Offers a range of property-backed investment opportunities, including bridging loans and development finance.	Yes.
easyMoney	Part of the 'easy' family of brands, easyMoney lends investments to property professionals, offering short-term loans typically between 3 and 12 months.	Yes.
FOLK2FOLK	Specialises in peer-to-peer lending for rural businesses, connecting local investors with local enterprises.	Yes. Minimum investment of £20,000 required.
Triodos Bank	Focuses on ethical and sustainable investments, allowing investors to support projects with positive social, environmental, and cultural impacts.	Yes.
LandlordInvest	Allows investors to make buy-to-let, development, and bridging loans backed by UK property.	Yes
Lending Works	Connects lenders with borrowers, offering peer-to-peer loans supported by the "Lending Works Shield" for added protection against defaults.	No.

Why invest in an IFISA?

Okay, so IFISAs might sound about as safe as a walk through Chernobyl. But is it really all downside? 

Well, leafing through the promotional literature from CrowdProperty, for example, they mention returns of up to 8% per annum – pretty spicy. 

Then there’s Kuflink, offering property-backed investments with returns of up to 9.13% per annum. 

LandlordInvest, a platform providing property-backed loans, boasts returns of up to 12% per annum. 

To put it into perspective, an investment in UK easy access cash ISAs can yield around 4% currently. 

So, IFISAs are not all radioactive fallout. With the right platforms, there are opportunities to outperform the market – although not without taking on a lot of risk. 

How to choose an IFISA

If you're certain – despite the significant risks – that you want to invest in alternative assets through an IFISA, start by choosing an accredited provider. 

Key factors to consider include the types of investments they offer, their fee structures, and their track record in managing and recovering from loan defaults.

Additionally, consider the platform’s history. 

Some platforms have faced significant challenges in recent years. For example, Avalon Investment Services, a provider offering ISA and SIPP administration, entered administration in 2016, which led to providers like Willis Owen suspending client access to investments managed through Avalon. 

The diversification of your portfolio is another important factor – make sure your investments are spread across multiple borrowers to reduce risk. 

Also, check what protections are offered if the platform faces financial difficulties or goes bust. Some platforms may provide a risk mitigation strategy, like the "Shield” contingency fund offered by P2P provider Lending Works to make unpaid lenders whole.

Some platforms may impose charges for early withdrawals, and the liquidity of your investments can vary significantly depending on the type of asset. 

How to transfer your ISAs into an IFISA

Transferring funds into an IFISA is a simple process, much like moving money between other ISAs, such as cash or stocks & shares ISAs. 

You can transfer funds from previous tax years in any amount without affecting your £20,000 annual allowance, while transfers from the current tax year must include the full balance. 

To start the transfer, complete a request with your chosen provider. Avoid withdrawing funds directly, as this could impact your ISA allowance for the current year. If transferring from a Stocks & Shares ISA, investments will be converted to cash before reinvestment. Transfers generally take up to 30 working days.

Final thoughts

IFISAs provide an alternative way to invest, offering the potential for high returns – but they come with significant risks. If you’re considering one, be sure to understand the risks, choose a reputable provider, and only commit what you can afford to lose.

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