How to invest in an IFISA in 2025
Innovative Finance ISAs (IFISAs) allow retail investors to take advantage of tax-free returns on peer-to-peer lending portfolios, and other alternative credit investments.
The IFISA was first established in 2016, as a way to encourage retail investors to fund British businesses, consumer credit and property building. At this stage, only crowdfunding or P2P lending platforms could offer IFISAs. However, earlier this year the IFISA remit was extended to include long term asset funds (LTAFs) and open ended property funds for the first time.
For now, the use of IFISAs outside the P2P market is still nascent. Over the past few months a number of wealth managers and investment brokers have gained IFISA permissions, suggesting that this product is set to play a larger role in the wealth market in the year ahead as more and more retail investors seek to access the booming alternative credit market in tax efficient ways.
Read more: P2P platforms report busy IFISA season
According to the HMRC ISA manager register, 65 companies are currently authorised to offer IFISAs, yet only 40 are currently marketing the product on their websites. The majority of these 40 active managers are crowdfunding or P2P lending platforms.
This means that P2P lending and crowdfunding remains the easiest way to invest in an IFISA, particularly for retail investors who cannot afford to deposit more than a few hundred or a few thousand pounds.
Loanpad’s IFISA has a minimum investment threshold of just £10, while Abundance Investments offers IFISA access with just £5.
Most other IFISA managers comes with much higher minimums. Kuflink recently raised its minimum to £1,000, while Rebuildingsociety has a £5,000 minimum and Folk2Folk’s minimum is £20,000.
easyMoney is the largest IFISA manager in the country, and it comes with a minimum investment of £100. However, easyMoney’s higher IFISA rates are reserved for investors who can commit £20,000 or more.
Before choosing an IFISA manager, it is worth checking the minimum investment thresholds to ensure affordability. Once your money is locked into a P2P investment it could be challenging to get it out. While most P2P platforms offer secondary market access to improve liquidity, this is no guarantee that you will be able to offload your loan parts or even sell them at market value.
Read more: Folk2Folk IFISA to remain P2P focused
Understanding risk is a key part of IFISA investing. All P2P lending platforms will ask new investors to complete an appropriateness test before adding funds, to ensure that they are cognisant of the risk of capital loss and lack of liquidity.
Furthermore, the Financial Conduct Authority has advised that retail investors place no more than 10 per cent of their portfolio into P2P products. This may exclude some platforms from the retail market.
According to the 4thWay Peer-to-Peer And Direct Lending (PADL) Index, IFISA returns have averaged 7.36 per cent per annum since the tax wrapper was introduced. These tax-free returns can quickly stack up, particularly if investors compound their interest annually.
Investing in an IFISA can pay handsomely in tax-free returns, but it is important to do your due diligence and choose the right IFISA manager before committing your funds.
Alternative Credit Investor has been covering this space since 2016 so look through our records to learn more about your IFISA manager of choice, or to stay up to date on all the latest IFISA news in 2025 and beyond.
Read more: British ISA could add £59bn to UK savings market
