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Innovative Finance ISAs

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Innovative Finance ISAs put your capital at risk, and you may get back less than you originally invested.
Returns are not guaranteed if their borrower defaults.

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  • Compare Innovative Finance ISAs

    Putting your money into an innovative savings account or IFISA, is just another way of earning interest over time, but unlike other standard savings accounts this is through peer-to-peer lending. The benefit of any ISA is that the interest you earn will not be taxed, though you will have to keep within the annual personal allowance for a cash ISA, which is currently set at £20,000.

    Choosing an ISA that involves P2P lending comes with a small amount of risk, but you can often get a better interest rate than most standard savings accounts, giving you a better return overall. An IFISA is often a good option for those looking for another savings opportunity alongside an existing savings account, or just a better interest rate.

    What is an innovative finance ISA?

    Otherwise known as an IFISA, an innovative finance ISA is a savings account that involves peer-to-peer lending. This involves a small amount of risk but will often include a better interest rate, meaning you get a better return than a standard cash ISA.

    With it being an ISA, the benefit is that you won’t have to pay tax on any interest you earn, meaning you’re likely to get a better bonus on top of your savings. However, it also means you will have an annual allowance of £20,000 to adhere to. You will be able to deposit up to this amount into one ISA, or spread your savings across a number of ISAs, as long as you don’t go above £20k.

    How does an innovative finance ISA work?

    • Deposit a lump sum (no more than £20k)
    • Earn interest on the full amount, without paying tax
    • Wait until the end of a set period before making a withdrawal
    • Your money gets leant to individuals or businesses and paid back at an agreed interest rate

    An innovative finance ISA works in the same way as any other savings account, but your savings are leant out to an individual or business and repaid at a slightly higher interest rate, that is still preferable for all parties. This is called peer-to-peer lending and despite coming with a small amount of risk as it is not covered by the FSCS, it should provide you as the saver with a better interest rate.

    Since you have a maximum limit of £20,000 as part of your ISA allowance, you can also use an IFISA as an additional savings pot, as long as you haven’t already gone over this allowance. That means you could potentially have a Cash ISA, IFISA and Investment ISA with different amounts deposited, earning interest on all three of them.

    How to open an innovative finance ISA

    When opening an innovative finance ISA, you will need to provide personal details, including your National Insurance number when applying online. As long as you have all the required details you shouldn’t have any issues, though in some instances you might be credit checked, depending on the provider.

    Watch out for the following details when applying for an IFISA:

    • Type of IFISA – the provider should indicate how your money will be invested. For example, you could be lending the money to an individual taking out a secured loan
    • Interest rate – you can compare available interest rates and calculate how much you could potentially receive after the set period has elapsed
    • Minimum and maximum deposit amounts – find out how much you have to deposit to open the IFISA. The maximum should be the same as your personal allowance, which is currently £20,000
    • Protection – often the provider will tell you what sort of protection is in place in case the individual or business fails to make repayments for any reason

    Once you have a grasp of these details, you should find it more straightforward to compare innovative finance ISAs using our tables and find the best IFISA deal for you.

    Who we work with

    We work with a number of providers to deliver a wide selection of savings accounts for you to choose from, enabling you to find the best option for you, whether it’s a cash ISA, investment ISA, peer-to-peer savings account or otherwise.

    Each of our providers are screened to make sure they meet our high standards before we agree to work with them. This ensures that you can trust them as much as we do, allowing you to find the best savings product from a reputable source.

    You can find out more about our lenders and providers here

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