Chancellor urged not to overlook IFISA in tax wrapper reforms
Innovative Finance ISA (IFISA) provider Folk2Folk has written an open letter to Chancellor Rachel Reeves, urging the government to ensure that the tax wrapper is not overlooked.
As the end of the tax year approaches, the UK peer-to-peer lending platform has highlighted the role that the wrapper around P2P investments can play in supporting private investment into UK businesses.
Folk2Folk, which provides SME loans backed by land or property, noted recent proposals to change the ISA landscape, which could result in combining cash ISAs and stocks and shares ISAs or reducing cash ISA limits.
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However, the firm said that this conversation has “overlooked” the IFISA.
“Since their introduction in 2016, IFISAs have provided a tax-free way for investors to lend directly to UK businesses, supporting SMEs which are vital to the UK economy,” said the letter, which was signed by Folk2Folk chairman Tim Sawyer.
“Unlike stocks and shares ISAs, which invest in publicly listed companies, IFISAs provide capital to privately owned businesses.
“Although IFISAs may not be suitable for every investor, their steady adoption demonstrates strong demand for tax-free, fixed-income opportunities. With a range of providers offering IFISAs at different entry levels, these investments serve a broad spectrum of investors. Investment in IFISAs rose 46 per cent year-on-year from £563m in 2022 to £821m in 2023, according to the latest HMRC data, reflecting growing investor appetite for alternative, tax-free investment options that offer fixed income rather than market-dependent returns.”
Read more: How to invest in an IFISA in 2025
Investors should have access to a diverse range of tax-free investment options, including the IFISA that presents an opportunity outside of traditional cash and equity products, the letter said.
“At Folk2Folk, we have seen first-hand how IFISA investments support the growth of UK businesses while providing investors with monthly, tax-free income,” Sawyer said. “In light of ongoing ISA policy discussions, we urge policymakers to recognise IFISAs as a vital part of the ISA landscape and ensure they are included alongside cash ISAs and stocks and shares ISAs in consumer education efforts.
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“Ensuring investors are fully informed about all tax-free investment opportunities, their distinct roles, and associated risks will help maintain a diverse, accessible, and effective savings and investment landscape.”
