IFISA Guide: High Risk, High Reward

Written by Fraser Stewart
Reading time 4 minutes
IFISA Guide: High Risk, High Reward image

Disclaimer: The value of your investments can go down as well as up, and you may not get back the full amount you invested. This information is not financial advice. Please consult with a financial adviser before making any investment decisions.

If you're an investor looking to explore opportunities beyond traditional stocks and shares, an Innovative Finance ISA (IFISA) might be worth considering. Offering the potential for higher returns than standard ISAs, IFISAs can add a dynamic dimension to your investment portfolio. However, it's important to understand the associated risks before diving in.

If you're new to ISAs, read our comprehensive ISA Guide to learn about all the different types and find the best one for you.

What is an IFISA?

An IFISA is a type of ISA that allows you to invest in peer-to-peer (P2P) loans and other alternative finance products in a tax-efficient way. Instead of investing in stocks or bonds, you're essentially lending money directly to individuals or businesses through online platforms. This direct lending can lead to higher interest rates, potentially translating to greater returns for you.

Why Choose an IFISA?

IFISAs can offer a unique set of advantages for savvy investors:

IFISAs might be a good fit for you if:

How Much Can I Invest in an IFISA?

For the 2024/25 tax year, your total ISA allowance is £20,000. You can allocate this entire amount to an IFISA or split it between different types of ISAs (Cash, Stocks & Shares, Lifetime).

How IFISAs Work

To invest in an IFISA, you'll need to choose a platform that offers IFISA accounts. Each platform typically focuses on specific types of investments, such as:

Once you've chosen a platform, you'll typically select the loans or investments you want to fund. Your returns will depend on the interest rates offered and the success of the projects you've invested in.

The Risks of IFISAs

While IFISAs can offer attractive returns, it's crucial to understand the risks involved:

Important note: Innovative finance ISAs aren't protected under the Financial Services Compensation Scheme (FSCS). This means your money could be at risk if you save with an IFISA online portal that goes bust.

Mitigating IFISA Risks

While the risks associated with IFISAs are real, there are steps you can take to minimise them:

Choosing the Right IFISA Platform

Selecting the right IFISA platform is crucial for a successful investment experience. Here are some key factors to consider:

IFISA Tips & Strategies

Here are some strategies to help you navigate the IFISA landscape:

Alternatives to IFISAs

If you're not ready to take the plunge with an IFISA, consider these alternatives:

Other ISAs: Cash ISAs, Stocks & Shares ISAs, and Lifetime ISAs (LISA) offer different risk and return profiles.

Peer-to-Peer (P2P) Lending: You can invest in P2P loans outside of an ISA, but you won't benefit from the tax advantages.


Here are some common questions about IFISAs:


IFISAs can be a rewarding option for experienced investors looking for potentially higher returns and portfolio diversification. However, they are not without risk. Before investing, do your research, understand the risks, and choose a reputable platform.

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