After months of rumours that Chancellor Rachel Reeves planned to slash the Cash ISA allowance as low as £5,000 per year, she finally clarified the government’s plans for the tax-free savings account during the Autumn Statement.

From 6 April 2027, the annual tax-free allowance for a Cash ISA will be cut from £20,000 to just £12,000 for most savers under 65. However, the overall ISA limit will remain at £20,000, leaving taxpayers with £8,000 which can be invested in either a Stocks & Shares ISA or an Innovative Finance ISA (IFISA).

This is all part of the Chancellor’s plan to generate economic growth by encouraging savers to become investors.

So why should savers consider the Innovative Finance ISA over a Stocks and Shares ISA?

As of April 2027, former savers will have a choice. Invest in the stock market or consider allocating into an IFISA.

Investing in a stocks and shares ISA offers diversity – there are more than 1,500 companies listed on the London Stock Exchange alone, covering every corner of the economy. It is possible to build a risk-managed, highly diverse portfolio of stocks and shares which can deliver good returns over time.

But the stock market is also subject to macro-economic shocks and market volatility, which could result in capital losses. Due to this volatility risk, it is particularly important to choose the right time to withdraw your money. For people using their ISA allowance to save towards a pension, this could mean delaying a withdrawal for months or even years while waiting for their portfolio to stabilise.

Innovative Finance ISAs can be a much less volatile option. An IFISA allows you to invest up to £20,000 per financial year in peer-to-peer loans or other alternative debt-based securities. Instead of holding cash or traditional investments, your money is lent to individuals or businesses through approved platforms. Investors collect their returns on a daily, weekly, monthly or quarterly basis, depending on the platform chosen.

As long as the underlying loans perform as expected, these monthly returns should be the same for the duration of the loan, when investors have the option to cash out or reinvest their capital into a new loan. Some platforms also offer the opportunity to access your capital early. For example, Loanpad offers an IFISA-eligible Daily Access account which allows investors to add or withdraw money from their account on a day-to-day basis (subject to liquidity).

For former savers, the relative stability and liquidity of an Innovative Finance ISA could appeal more than a stocks and shares ISA, but there are risks involved. The main risk in P2P lending is that a borrower defaults on their repayments, placing investor capital at risk.

Furthermore, IFISA investments are not covered by the Financial Services Compensation Scheme (FSCS) so any losses will not be recoverable. This is why it is so important for investors to choose a platform with a long track record, experienced management team and a strong risk management plan.

Loanpad manages risk by taking property as collateral on every loan, with a very low loan-to-value. This means that in the event of a borrower default, the property can be sold to recoup investor capital. Lending partners also co-invest on every loan alongside our investors, and take the first loss on any potential default, further protecting investor capital. We also carry out intensive due diligence on all loans throughout the duration of the loan term.

While past performance is no guarantee of future success, our risk management processes mean that we have maintained a zero- loss rate for our investors since inception.

Investing in British economic growth

Innovative Finance ISAs allow investors to directly support British businesses and entrepreneurs by providing them with funding that is increasingly hard to secure from banks. In this way, investing in an IFISA meets the government’s goal of supporting the British economy and boosting innovation.

The government’s new ISA regime is nudging investors towards investing and away from the traditional safe haven of cash savings. For lifelong savers who are considering investing for the first time, the IFISA can be a less volatile option than a stocks and shares ISA, while delivering higher returns than cash savings products.

Loanpad’s Innovative Finance ISA accounts are currently targeting returns of five or six per cent, depending on the type of account chosen. Learn more about our ISA offerings here.

Unnecessary taxation can erode your hard-earned investment returns, which is why 22.3m UK savers and investors chose to shelter their money in an ISA during the 2023-24 tax year¹.

While the Cash ISA is best for risk-averse savers, and the Stocks & Shares ISA is favoured by traditional investors; the Innovative Finance ISA (IFISA) is arguably the best tax-efficient option for property investors and / or those seeking to diversify their investments.

What is an Innovative Finance ISA?

Launched in 2016, the IFISA was initially intended to allow investors in P2P loans and crowdfunding platforms a way of shielding their returns within a tax-free wrapper. More recently, the Innovative Finance ISA remit has been extended to include long term asset funds (LTAFs) and open-ended property funds as well.

Up to £20,000 can be invested in IFISA accounts during each financial year, and investors can hold multiple Innovative Finance ISAs simultaneously. Unlike Cash ISAs, IFISAs are not covered by the Financial Services Compensation Scheme (FSCS) and it is important to note that capital may be at risk in the event of a borrower default. However, good Innovative Finance ISA managers will ensure that they have strong risk management policies in place to minimise the risk of default. For example, Loanpad takes property as collateral on every loan, with an average LTV of 45.47%.

The tax benefits of the IFISA

All ISAs share one big advantage: returns are completely tax-free. Interest earned within an IFISA is not subject to income tax, and any capital gains are also shielded from HMRC.

For example, if you invest £10,000 in a property-backed Innovative Finance ISA paying 6% in annual returns, you would earn £600 in interest each year, and you can keep every penny of these earnings without any tax deductions. If this interest is reinvested, you can also benefit from the effects of compound interest, which can help you to build wealth more quickly.

Loanpad offers two ISA-eligible accounts, the ISA Classic and the ISA Premium. These accounts are currently targeting returns of 5% and 6%, respectively. The ISA Classic allows for daily access so that investors can make withdrawals when needed. The ISA Premium account requires 60 days’ notice before any withdrawals are made subject to liquidity.

How to use the IFISA in property-backed lending

Loanpad’s Innovative Finance ISA accounts allow investors to back British properties and earn interest on property-backed loans. Every loan is secured against physical property which can be sold in the event of a borrower default, thereby providing an additional layer of security for investors.

This is one of the most direct ways to access diversified property market returns. Each investment is spread across a number of property loans, which reduces the risks associated with a default and offers exposure to different properties in a variety of neighbourhoods.

To access the benefits of property-backed ISAs, simply choose a regulated P2P property lending platform such as Loanpad, open a new account, deposit your funds and start investing.

All new investors must complete an appropriateness test to ensure that they are aware of the risks involved in P2P lending. While past performance is no indication of future success, Loanpad has maintained a zero-capital default record to date due to the platform’s risk-averse strategy and strong underwriting due diligence.

Get in touch with us today to learn more about Loanpad’s Innovative Finance ISA and how property-backed loans work.

[1] bit.ly/4qlopL3

If you invest in any form of property loan, you may be familiar with the LTV acronym. LTV stands for Loan-to-Value, and it is one of the most important concepts to get to grips with as a property investor.

What is Loan-to-Value (LTV)?

Simply put, LTV is the ratio between the amount of money being borrowed and the value of the property securing that loan.

For example, if a borrower wants to borrow £500,000 to finance a property development, and the property securing the loan is valued at £1m, the LTV would be 50%.

LTV is used by every property lender and property lending platform as a way of assessing the security behind each loan. It is particularly important when property is being used as collateral against the overall loan. If the borrower is unable to keep up with their repayment schedule and all other efforts to refinance or recover the loan have failed, the lender can make a claim the collateral and sell it in order to recoup investor capital.

It is worth noting that there is a difference between a first charge and a second charge when it comes to property collateral.

Lenders who have a first charge on a property will be first in line for repayment whenever the property has been sold. Lenders with a second charge claim will be paid second, which effectively increases the risk as there is a possibility that there may not be enough money left to pay everyone.

Loanpad always takes a first charge on every property that is taken as security against each loan alongside our lending partners with Loanpad ranking above our lending partners upon repayment. This allows us to reduce risk for our investors, by ensuring that they are first in the queue should a loan default lead to a collateral sale.

Why does LTV matter to investors?

For retail investors in property P2P lending, the LTV figure provides a snapshot of risk.

In theory, the lower the LTV, the lower the risk of capital loss. For example, if a loan has an LTV of 50%, the property would have to fall in value by 50% before investors’ capital is at risk, assuming the platform can recover the property in a default.

If a loan is offered at 80% LTV, there is less of an equity cushion if things go wrong. Even a modest fall in property prices could impact recovery values.

Essentially, the lower the LTV, the greater the buffer between the loan amount and the underlying security.

LTV in P2P lending

When reviewing any new borrower applications, property lending platforms such as Loanpad will carry out extremely thorough due diligence to ensure that every borrower is creditworthy and that the underlying collateral has value.

In order to minimise risk to our investors, we keep our LTVs very low. As of September 2025, our average LTV was just 45.04%. This means that a property would have to decline in value by more than 54.96% before our collateral is impacted. As a result of our conservative LTVs and strong due diligence process, no investor has ever made a capital loss with Loanpad to date.

LTV is one of the simplest yet most powerful indicators of risk in property-backed P2P lending. While it should never be the only factor you consider, it provides a clear benchmark for assessing how much security sits behind your investment.

As a P2P investor, it is very useful to understand and monitor LTV, alongside other factors such as borrower experience, market conditions, and platform due diligence. When you have more knowledge about a loan and its underlying risk, you can make more confident and informed investment choices.

ISA reform is coming. Earlier this year, Chancellor Rachel Reeves signalled that she was open to reviewing the UK’s current ISA regime, with some speculation suggesting that this may involve streamlining the current range of ISA products, or even lowering the annual allowance.

In July, the government opened up a consultation into ISA reform, with further details expected to be announced at Reeves’ Mansion House speech on 15 July. However, on the day of the speech, no references to ISA reform were included.

This lack of a clear ISA policy has kept savers and investors in the dark, wondering how their ISA allowance could change in the next financial year.

So what is likely to change?

As of now, we really don’t know very much at all. In her Spring Statement, Reeves said that her goal was to encourage more UK taxpayers to invest rather than save, in an effort to boost the British economy. The government later released a statement saying that it is “looking at options for reforms to Individual Savings Accounts that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.”[1]

This suggests that any ISA reformations will focus on boosting the popularity and accessibility of investment ISAs such as the Stocks and Shares ISA and the Innovative Finance ISA (IFISA). One way that the government may do this is by making the Cash ISA less attractive.

Prior to the Mansion House speech, it was rumoured that Reeves planned to slash the annual Cash ISA allowance from £20,000 to £5,000, while keeping the £20,000 limit for other investor-focused ISAs. This could encourage more people to look beyond Cash ISA options when choosing where to invest their annual ISA allowance.

How can you maximise your ISA allowance now?

In her Spring Budget, Reeves reassured savers and investors that ISA reform would not be implemented in the current financial year. That means that until 5 April 2026, every UK taxpayer can make full use of their £20,000 annual ISA allowance as usual. This £20,000 can be spread across Cash ISAs, IFISAs, Stocks and Shares ISAs and Lifetime ISAs (although there is an annual limit of £4,000 on this type of ISA).

Furthermore, all existing ISA balances can be transferred, either to different account providers or from one type of ISA to another.

With no guarantees that this structure will remain in place after April 2026, savers and investors should take action now to ensure that they are making the most of their current allowance.

This might involve putting aside extra money for ISA savings and investments, while the annual allowance is still at a high.

Savers might also take this time to research alternatives to Cash ISAs. For example, IFISAs can also offer fixed returns by matching investors with borrowers who pay an agreed interest rate on a daily, monthly, quarterly or annual basis, for the duration of the loan. No two IFISA providers are the same, so it is important to conduct thorough due diligence before placing any money with a provider. It is also important to understand the risk associated with investment ISAs, namely that there is a chance that investor capital could be lost due to an unperforming loan or poor stock performance.

Whatever the future holds for the ISA, there are plenty of options available to UK taxpayers who want to grow their savings and investment portfolios and take advantage of tax-free returns – at least in the current financial year.

[1] https://assets.publishing.service.gov.uk/media/67e3ec2df356a2dc0e39b488/E03274109_HMT_Spring_Statement_Mar_25_Web_Accessible_.pdf

Two Decades In, P2P Lending Still Delivers Strong Returns

Peer-to-peer and online direct lending made an average return of 7.61 per cent in 2024, according to the latest statistics from the 4th Way P2P And Direct Lending (PADL) Index.

This means that online lending has outperformed inflation in nine out of the past 10 years and has earned investors 7.31 per cent per annum annualised, net of investing costs and bad debts over the past decade, 4th Way said.

By comparison, 4th Way calculations showed that the FTSE 100 has returned 4.77 per cent annualised over the same period, after assuming one per cent in investor costs. FTSE 100 returns have beaten inflation in six out of the past ten years.

According to 4th Way, in 2024, the FTSE 100 delivered 8.54 per cent in net returns to investors, beating online lending returns by 0.93 per cent.

“Share investors returns pipped P2P lending last year, but despite now coming out of a tough time for borrowers, the past few years have shown the reliability of this asset class, with solidly positive results,” said Neil Faulkner, co-founder and managing director of 4th Way.

“Indeed, online lending as an asset class has had positive returns every year since it started in 2005, even when considering all closed platforms. 20 years later, when will the wider investing community will catch on?”

Faulkner added that online property lending has stably paid out approximately six to eight percent per annum, “comfortably” beating the stock market in the long run and without the volatility associated with equity investing.

Despite another year of positive returns, the PADL data found that P2P and online direct lending suffered its heaviest ever losses in December 2024, with total loan write-offs amounting to almost £4m in interest and capital. Without these losses, the PADL Index would have reported a return of 8.12 per cent for the year.

4th Way reported that the worst 12-month period for online lending happened around 10 years ago, when the sector pulled in 5.51 per cent in net returns, while the stock market made just two per cent. The best 12-month period saw investors earn 8.77 per cent from their online lending investments.

The PADL Index comprises data collected from six of the largest P2P and online lenders in the UK, including Loanpad. Together, the total lending volume of these platforms is equal to half the size of the P2P lending market, at around £750m.

Independent ratings agency 4th Way has tracked the performance of the online lending sector since July 2014.

“Loanpad is a proud constituent of the PADL Index, and we report our performance data directly to 4th Way,” said Neil Maurice, Chief Operating and Finance Officer at Loanpad.

“We are not surprised to see another year of positive returns for the asset class. P2P lending has been around for 20 years and during that time it has proven its ability to deliver competitive, consistent returns for investors, while adding diversity to investor portfolios.

“While past performance is no guarantee of future returns, the long track record of P2P lending helps show that this asset class can deliver for its investors. This is thanks to strong due diligence, conservative lending practices and well-chosen investment opportunities. We look forward to seeing what 2025 brings.”