Use Your ISA Allowance Before the Tax Year Ends


As the end of the UK tax year approaches, high net-worth individuals and self-certified sophisticated investors can use their ISA allowance to help expand their investment portfolio. Have you ever considered how an Innovative Finance ISA (IFISA) could potentially transform your financial landscape?

It is important to take advantage of the tax-free benefits offered by Individual Savings Accounts (ISAs) and the Innovative Finance ISA (IFISA). By making contributions to your ISA before the end of the tax year, you can maximise your tax-free savings and investments.

ISAs are a popular way for individuals to save and invest money without having to pay tax on any returns they earn. The IFISA, in particular, allows investors to lend money through peer-to-peer lending platforms and earn tax-free interest on their investments.

By utilising your ISA contributions now, you can ensure that your investments are working efficiently for you and are taking advantage of the tax benefits available. This can be an important part of an overall investment strategy, helping you to grow your wealth while minimising your tax liabilities.

So, as the end of the tax year approaches, now is the perfect time to review your investment portfolio and consider making any necessary contributions to your ISAs to make the most of the tax-free benefits they offer.

What Is an Innovative Finance ISA?

The IFISA is a type of ISA that allows you to lend money through peer-to-peer (P2P) lending platforms while earning tax-free interest. Investors choose IFISAs because they provide investment opportunities and tax benefits on returns made. IFISAs are a popular choice for UK investors wanting to expand their investment portfolio beyond stocks and bonds.

How the IFISA Works

Investors choose a platform authorised by the Financial Conduct Authority (FCA) and allocate part or all of their annual ISA allowance (up to £20,000 for the tax year 2023/2024) to investments that are IFISA eligible. These investments primarily include loans to individuals, businesses, and property developers. The returns on these investments depend on the borrowers repaying their loans, with interest rates often higher than those offered by traditional savings accounts.

Benefits of IFISA

  • Higher Potential Returns: Compared to Cash ISAs and some Stocks and Shares ISAs, IFISAs offer higher potential returns. Interest rates on P2P platforms can significantly exceed traditional savings rates, although this comes with higher risk. Many investors are attracted to P2P for this reason.
  • Tax Efficiency: Like other ISAs, the IFISA provides a tax shelter for investments, meaning any interest or gains accrued are free from UK tax.
  • Portfolio expansion: Investing in an IFISA can add diversification to an investor’s portfolio, spreading risk across different asset classes.
  • Supporting Businesses and Individuals: Through P2P lending, investors can directly support businesses and individuals who may not have access to traditional banking facilities.


Risks and Considerations

While the IFISA offers attractive benefits, it’s crucial to understand the associated risks before investing:

  • Credit Risk: The primary risk is that borrowers may default on their loans. P2P platforms mitigate this risk through credit checks and diversification, but the risk cannot be entirely eliminated.
  • Platform Risk: The stability and reliability of the chosen P2P platform are vital. Investors should research platforms thoroughly, considering factors such as track record, regulation, and financial health.
  • Liquidity Risk: Accessing money invested in an IFISA can be less straightforward than withdrawing cash from a savings account. While some platforms offer secondary markets or early access options, selling investments can be challenging, especially in a downturn.
  • No Financial Services Compensation Scheme (FSCS) Protection: Unlike Cash ISAs, IFISA investments are not covered by the FSCS, meaning capital is at risk and you may lose everything that you lend.

Comparing IFISA with Other ISAs

When comparing IFISAs to other types of ISAs, such as Cash ISAs and Stocks and Shares ISAs, the main differences lie in the risk-return profile and the underlying assets. Cash ISAs offer low risk but also lower returns, primarily suitable for short-term savings. Stocks and Shares ISAs, while offering potentially higher returns through investments in equities and bonds, come with market risk. The IFISA sits between these two, offering a balance of risk and return that may suit investors looking for alternative investment opportunities.


Who Should Consider an IFISA?

The IFISA is most suitable for investors who are:

  • A high-net-worth individual or a self-certified sophisticated investor.
  • Looking for higher potential returns than those offered by Cash ISAs and willing to accept higher risk.
  • Interested in diversifying their investment portfolio.
  • Comfortable with the concept of peer-to-peer lending and the risks associated with lending to individuals and businesses.

Why invest in Peer-to-Peer lending with Sourced?

Peer 2 Peer Lending at Sourced involves investing in UK property backed loans. Lending is usually for a period of 6 to 24 months and the investor is always paid first at a project’s end.

Our rate of return is up to 12% Pa*, with a maximum loan to value of 70%. This far outstrips High Street Lending and also that of many other Peer-to-Peer Lending platforms.

Our property experts are just that – experts; having spent decades in the industry. They can spot a poor deal a mile away and they are well-versed in what’s required when it comes to due diligence. We also have a huge network, with more than 220 offices throughout the UK.


The Innovative Finance ISA presents an attractive opportunity for investors seeking higher returns and willing to accept higher risks. Investments made via an IFISA can play a valuable role in a diversified investment portfolio as part of an overall investment strategy.

However, it’s essential to conduct thorough research, read the risk statements provided by your chosen platform. With the tax year end coming soon, there’s no better time to explore how an IFISA can benefit you. Make your contribution before the deadline. Learn more about the Sourced Capital IFISA, you can download our IFISA guide here.


*Don’t invest unless you’re prepared to lose money. This is a high-risk investment. Take 2 mins to learn more.

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