As the 5 April 2026 tax year deadline approaches, many UK savers and investors are reviewing their finances and deciding how best to make use of their remaining ISA allowances and other tax-efficient allowances.
This year, the annual ISA allowance 2025/2026 remains at £20,000. This means that all UK taxpayers are entitled to shelter up to £20,000 in a Cash ISA, Stocks and Shares ISA and/or an Innovative Finance ISA (IFISA) account. If you invest £10,000 before 5 April 2026, the remaining £10,000 of your ISA Allowance 2025/2026 will disappear when the new April tax year begins.
The £20,000 ISA allowance can be kept in just one account, or across a variety of different accounts to allow for portfolio diversification. For example, stock market volatility may mean that more risk-averse investors might prefer to keep a larger sum in a Cash ISA account this year, while more risk-aware investors may wish to consider an IFISA for the first time.
ISA allowance variables for the 2025/2026 tax year
Not all ISAs follow the annual £20,000 allowance rule. There are two exceptions – the Lifetime ISA (LISA) and the Junior ISA (JISA).
Up to £4,000 can be held within a LISA, but this counts towards your overall £20,000 annual ISA allowance, so if you chose to max out your LISA this year you would have just £16,000 of your remaining ISA allowance available for other ISA accounts. The LISA is unique among other ISAs as it can only be used to buy a first home or for a pension fund. Furthermore, LISA users can only pay into the account until they are 50 years old, and pension withdrawals can’t begin until the age of 60.
Meanwhile, up to £9,000 can be added to a Junior ISA during the April-to-April tax year. This money can be invested or saved on behalf of a child, and therefore it does not impact on the £20,000 annual ISA allowance that adults are subject to. In theory, you could invest £20,000 in your own ISA accounts, plus an additional £9,000 in the account of your child, effectively meaning that you are sheltering £29,000 of your income per year from unnecessary taxation.
How to use your £20,000 ISA allowance in the 2025/26 tax year
The UK government has indicated that it is interested in reforming the ISA landscape. This has already resulted in the announcement that the Cash ISA allowance will be reduced from the current £20,000 per year to £12,000 per year from April 2027. With the prospect of change ahead, this could be a good time to ensure that you are making the most of the current ISA allowance and maximising your chances of making tax-free returns.
Before deciding how to allocate your ISA allowance, it is important that you understand the difference between the three main account options.
- Cash ISAs are viewed as lower-risk, offering variable or fixed interest rates across one, two or five years, closely tied to the Bank of England base rate. If the base rate goes down, variable rate Cash ISAs may also see their interest rates reduced.
- Stocks and Shares ISAs offer a wide range of potential returns – including the possibility of negative returns, or losses. Investors can choose from hundreds of options, including equities, bonds, and alternatives, as well as tracker funds which mirror the performance of the world’s key stock markets. A financial advisor can help you to put together an ISA-eligible stocks and shares portfolio, or you can manually select your own stocks and shares if you feel confident in your ability to read the market and understand risk.
- FISAs allow investors to lend money through authorised peer-to-peer lending platforms, as well as long-term asset funds (LTAFs) and open-ended property funds, while still benefiting from the tax advantages of an ISA wrapper. For investors who are comfortable with the risks associated with lending, this can offer an attractive way to generate potentially higher yields than traditional savings accounts, without experiencing the daily fluctuations associated with the stock market.
With the annual ISA allowance, the motto is ‘use it or lose it’. Even if you are not able to invest the full £20,000, any savings and investments made within the tax wrapper can help to protect your capital and returns from unnecessary taxation, while benefiting from the effects of compound interest over time – just as long as you don’t make any unplanned withdrawals. The allowance resets on 6 April, so this is the season to spring into action and come up with an ISA strategy that will carry you through the next financial year as well.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
The end of the tax year is quickly approaching, with this year’s ISA deadline expiring on 5 April 2026. That means that investors and savers have just a few weeks left to decide where to keep their money before the ISA deadline, in order to avoid unnecessary taxation.
In an investment landscape shaped by persistent inflation, shifting interest rate expectations and geopolitical volatility, it can be hard to decide between the relative safety (but limited yield) of a Cash ISA, and the opportunity (but relative risk) of a Stocks and Shares ISA or an Innovative Finance ISA (IFISA).
When making a last-minute ISA choice ahead of the ISA deadline, you need to consider your broader financial objectives, whether this is tax efficiency, capital preservation, or long-term wealth generation. It is also important to be aware of the level of risk that you are comfortable with, before choosing a new investment account.
So how do you decide where to put your money before the ISA deadline arrives?
Understanding your options before the ISA deadline
All UK taxpayers have four main options when it comes to ISA accounts. These are:
- Cash ISAs – offered by most banks and building societies, with rates often fixed across one, two or five years.
- Stocks and Shares ISAs – offered by most investment platforms, with the ability to choose a bespoke or a strategic portfolio of stocks and shares, adjusted for your individual risk requirements.
- IFISAs – offered by most peer-to-peer lending platforms, crowdfunding platforms, long-term asset funds (LTAFs) and open-ended property funds, subject to investor eligibility.
- Lifetime ISAs (LISAs) – offered by some banks and investment platforms, this ISA is capped at £4,000 per year and can only be used for a first home purchase or pension, subject to investor eligibility.
For the current 2025/26 tax year, up to £20,000 can be invested in either a Cash, Stocks and Shares or Innovative Finance ISA before the ISA deadline. However, from April 2027, the Cash ISA allowance will be reduced to £12,000.
The diversity of choice in the ISA space means that you can choose to spread your annual allowance across a range of different types of saving and investing accounts before the ISA deadline. For example, you may choose to use up the entire £4,000 LISA allowance, and then divide the remaining £16,000 allowance across Cash, Stocks and Shares, and IFISAs.
It is also possible to diversify your money even further by investing in several different Cash ISA accounts, Stocks and Shares accounts and IFISAs.
But when time is of the essence, and geopolitical challenges are wreaking havoc with the global equity markets, decisive action is required.
Why consider an IFISA before the ISA deadline?
Every ISA has its place. Cash ISAs can provide capital security and liquidity, but real returns may be modest once inflation is taken into account. Stocks and Shares ISAs offer market exposure and long-term growth potential, but short-term volatility can be uncomfortable, particularly in uncertain macroeconomic conditions.
For investors who are seeking yield without full equity market exposure, the IFISA is worth a closer look.
An IFISA allows investors to earn tax-free returns by lending through FCA-regulated peer-to-peer and private credit platforms. This offers diversification away from the equity markets, and the possibility of earning fixed returns by backing British businesses and supporting the domestic property market.
The key risk with IFISAs is that one or more of the underlying loans will fall into default. This risk can never be completely eliminated, but it can be minimised through good portfolio management and the addition of collateral on all loans.
Before choosing an IFISA, do your due diligence on IFISA providers and make sure that you choose one which is FCA-registered, and has a long track record in the market. While past performance is no guarantee of future returns, it is also helpful to look at a platform’s history to get a sense of how it responds during times of economic stress, such as the Covid pandemic.
Timing is important when it comes to investing, but in a rapidly changing world with multiple stress factors hitting the market simultaneously, the priority should be to simply make smart and informed choices with your money while taking full advantage of any tax efficient benefits that are available to you. Before the ISA deadline has passed, carve out some time to look at your financial goals and shelter your cash from the tax man, ideally whilst also earning inflation-beating returns.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
How to choose the right ISA this tax season
The end of the ISA tax year is rapidly approaching, and both savers and investors are rushing to take advantage of their annual ISA allowance. The government recently announced plans to reduce the Cash ISA allowance from its current £20,000 to £12,000, but this change will not come into effect until next year.
In the meantime, UK taxpayers can choose to allocate up to £20,000 per year into a range of ISA products. But what is actually available?
Cash ISA
Easily the most popular type of ISA. In the 2023/24 ISA tax year, almost 10 million people held cash ISA accounts1, making them by far the most popular ISA wrappers on the market. Most banks, building societies and investment platforms now offer Cash ISA accounts, with returns closely linked with the base rate. At the time of writing, the UK’s base rate is 3.75% and the top cash ISA rate was around 4.5%2.
Cash ISAs are popular for their perceived safety – they are protected under the Financial Services Compensation Scheme (FSCS) which means that any Cash ISA loss of up to £120,000 will be protected should the Cash ISA provider fail.
However, while Cash ISAs offer a certain amount of security and predictability, the returns are relatively low. If Cash ISA returns are unable to keep pace with the rate of inflation, this means that your money loses its spending power in real time.
Stocks and Shares ISA
The second most popular type of ISA had more than four million subscribers in 2023/24. This ISA allows taxpayers to invest tax-free in assets such as shares, bonds, and funds.
Unlike a Cash ISA, the value of investments can go down as well as up, but the idea is that over the long term, a Stocks and Shares ISA may offer higher growth potential. However, if you are using this ISA to choose individual stocks and shares, you run the risk of making a loss on a bad investment. Furthermore, market volatility can drag down the value of any investment portfolio and quickly. To maximise the value of a Stocks and Shares ISA it is best to maintain a diversified portfolio of assets and to avoid falling into a day trader mindset and obsessively monitoring the market for opportunities or changes.
Lifetime ISA
This ISA is designed to help people either buy their first home or to save for their retirement. You can only open a Lifetime ISA aged 18 to 39, and you can only contribute until you are 50 years old. The government will add a 25% bonus on contributions, up to a limit.
But there are a few rules. You can only contribute up to £4,000 per year, and this £4,000 counts towards the £20,000 overall annual ISA allowance. It can only be withdrawn to purchase your first home, or to finance your retirement.
Innovative Finance ISA (IFIS
This is arguably the fastest-growing type of ISA account in the UK. The IFISA is a newer form of ISA that allows tax-free investment in peer-to-peer (P2P) lending and property-backed lending platforms such as Loanpad, and private credit-style loan products such as long-term asset funds (LTAFs).
Instead of earning interest from a bank, you earn returns from the borrowers who are repaying their loans. This ISA is popular with investors looking for income and portfolio diversificationand offers an opportunity to support home-grown entrepreneurs and property developers. The returns are typically fixed across the term of the loan and can range from 5% to 15%, depending on the platform chosen and the level of risk.
Unlike Cash ISAs, IFISAs are not protected by FSCS, and understanding the platform’s underlying loan security (such as property valuations and loan-to-value ratios) is crucial.
Junior ISA
This is an ISA for children under 18, which is managed by a parent or guardian until the child turns 18. For the 2025/26 ISA tax year it has a limit of £9,000 per year. Contributions can be made by anyone, including parents, guardians or simply well-wishers.
All of the money invested and saved in a Junior ISA belongs to the child and can’t be accessed until they are 18. This is a great option if you want to set up a nest egg for a child or shelter an inheritance from over-taxation.
Choosing an ISA
With so many types of ISA to choose from, the investing and savings space can seem daunting. But there is no reason why you can’t invest across each type of ISA structure. An ISA comparison can help you understand how different ISAs fit together within your overall strategy. Diversification is the friend of the savvy investor, and by spreading your money across a variety of different types of ISA, you may be able to protect yourself from any sudden market shocks.
The most important thing is not trying to choose the ‘perfect’ ISA – it’s about using your ISA allowance consistently and aligning your ISA strategy with your goals, timeline and risk comfort.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
There has been a lot of chatter about ISA reform lately, leaving many savers and investors unsure about where they stand with their ISA portfolios.
In her Autumn Statement, Chancellor Rachel Reeves announced that the Cash ISA allowance would drop from the current £20,000 to £12,000 in the 2027/28 financial year. For now, UK taxpayers can invest a total of £20,000 in ISA accounts, including Cash ISAs, Stocks and Shares ISAs, and Innovative Finance ISAs (IFISAs). Up to £4,000 can be added to a Lifetime ISA and up to £9,000 into a Junior ISA, just as long as the £20,000 annual ISA limit is not breached.
Unlike a Cash ISA where you earn interest from cash savings, IFISAs allow you to earn returns from alternative investments, most commonly peer-to-peer (P2P) loans and other forms of direct lending. For income-seeking investors, that can be appealing. But it also comes with additional complexity and risk.
In the 2025/26 tax year, IFISA rules remain broadly stable. However, recent reforms have significantly expanded what can sit inside an IFISA.
What’s different about IFISAs
The IFISA was initially created to allow UK taxpayers to invest in P2P lending and crowdfunding platforms but as of 6 April 2024, the IFISA remit was expanded to include long-term asset funds (LTAFs) and open-ended property funds for the first time.
This change was designed to enable everyday investors to access a wider variety of long-term, less-liquid asset classes within a regulated ISA framework.
In the past, IFISA investors had to choose just one IFISA to invest in per year, but this restriction has now been lifted. Investors can now hold multiple IFISAs across different providers, up to the £20,000 annual ISA allowance.
Who can invest in an IFISA
Any UK taxpayer over the age of 18 can open an IFISA with a registered IFISA provider and start investing in P2P lending, LTAFs and open-ended property funds. Up to £20,000 can be held within an IFISA each financial year, and this allowance resets on 6 April.
What are the risks?
IFISAs are tax free but they are not risk free. The key risk with IFISA investing is that if the underlying loans default, you lose your capital as well as any interest that you expected to receive. Good IFISA managers will work hard to minimise this risk, but it cannot be eliminated entirely. This is why it is so important to do your own due diligence before choosing an IFISA manager and trusting them with your money.
IFISAs are not protected by the Financial Services Compensation Scheme (FSCS) which means that in the event of a platform failure, you may not be able to recoup any money lost. For this reason, it is important to ensure that you can afford any losses associated with IFISA investing and diversify your portfolio so that you are not completely reliant on one type of ISA investment.
Why invest in an IFISA now
The ISA landscape is changing. Next year, the Cash ISA allowance will fall, reflecting a government aim to encourage more UK taxpayers to invest rather than save. Meanwhile, macro-economic and geo-political risks are primed to wreak havoc with the stock markets, sending nervous investors in search of new homes for their funds.
This means that there is likely to be an influx of new ISA investors hitting the market next year who are considering IFISAs for the first time rather than Cash ISAs or Stocks and Shares ISAs. The current tax year presents a great opportunity to get ahead of the rush and get to grips with the IFISA market so that you can maximise your tax-free allowance and make the best financial decisions with your money.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
P2P INSIDER
Supercharge your understanding of Peer to Peer investing todayWith interest rates ticking lower and banks continuing to hold back on lending, both investors and borrowers are re-evaluating traditional finance options. And one of those options is property-backed peer-to-peer(P2P) lending.
As we look towards the year ahead, we expect to see property-backed P2P lending become more popular among both borrowers and investors.
For borrowers, alternative lending platforms can represent an attractive alternative to banks. Alternative lenders can make very quick decisions, and we can offer competitive terms to property developers and BTL investors who are seeking funding for their next project.
For investors, property-backed P2P lending platforms can deliver inflation-beating returns which can also be sheltered from tax within an Innovative Finance ISA (IFISA) wrapper. Furthermore, by investing in property-backed loans, investors are directly supporting the UK’s economic growth and helping to solve the ongoing housing crisis.
What is property-backed P2P lending?
Property-backed P2P lending is a form of alternative finance that allows individuals to lend money directly to borrowers through an online platform, with property used as collateral for the loan. Instead of borrowing from a traditional bank, property developers or owners raise funds from a pool of private investors, each contributing a portion of the total loan amount. Loanpad has a minimum investment threshold of just £1, as part of our commitment to make it as easy and affordable as possible for people to access property market returns.
The key feature of property-backed peer-to-peer lending is that every loan is secured against a physical asset such as a residential, commercial, or development property. This security can help to minimise the risk of capital loss for lenders because, if the borrower fails to repay, the property can be sold to recover the outstanding debt. At Loanpad, we take collateral on every loan and maintain very low loan-to-values (LTVs) to help control the risk of investor losses.
To date, we are proud to say that not a single investor has ever lost a penny of their capital with Loanpad. However, while the risk of capital loss can be managed, it is never completely removed. All investors are encouraged to do their own due diligence to ensure that they understand what they are investing in, and whether they are comfortable with the risks involved.
Why consider property-backed lending now?
The UK government has been vocal about its desire to see UK taxpayers move their money out of low-yielding savings accounts and into investments. To this end, Chancellor Rachel Reeves recently announced plans to reduce the Cash ISA allowance from £20,000 per year, to £12,000 per year. However, the £20,000 limit for Stocks & Shares ISAs and Innovative Finance ISAs remains intact. This means that UK taxpayers can continue to allocate up to £20,000 per year into IFISA-eligible investments such as property-backed lending.
In addition to this, a rash of new property tax announcements in the Autumn Statement has made it more difficult for people to build wealth by buying and selling or buying and renting residential properties. In order to earn money from the UK property market, these investors now need to think outside the box and consider investing in the sector rather than making a new property purchase.
How to choose the right peer-to peer property-lending platform
For all the reasons referenced above, we expect to see more investors considering P2P property lending in the year ahead. But the key challenge for newer P2P investors will be choosing the right platform.
Peer-to-peer property lending has been around for more than a decade, and in that time enhanced regulation and competition has separated the strongest players from the weaker ones. While past performance is no guarantee of future success, investors can now look to each individual platform’s track record to get a sense of its ability to manage risk effectively and deliver consistent returns to investors.
Property-backed P2P is collateral-backed and actively regulated, and platforms such as Loanpad have proven that they have the ability to protect investor capital even during macro-economic shocks such as the Covid-19 pandemic. 2026 could be the year that this sector takes off – just as long as investors understand the risks involved and trust the right platforms with their money.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
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.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
Property-backed peer-to-peer (P2P) lending has become an increasingly popular way for investors to diversify their portfolios, enjoy attractive returns, and support real-world projects. By lending money directly to property developers or businesses, investors can often achieve yields higher than those available from traditional savings accounts or Cash ISAs.
But as with any investment, there are risks. However, understanding these risks can help you make informed decisions and protect your capital.
So, what are the key risks in property-backed peer to peer lending?
1. Borrower default risk
The main risk with any peer to peer loan is that the borrower may not be able to keep up with their loan repayments, sending them into default. In property-backed P2P, this could happen if a developer runs into cash flow issues, if there are construction delays, or if the completed property fails to sell at the expected price.
Default risk can be mitigated in a few ways. Firstly, it is important to choose an experienced and well-run peer to peer property lending platform which has a strong track record of carrying out intensive due diligence on every loan and every borrower. Good platforms will detail their lending process openly on their website and will be available to answer any investor questions.
Next, look for loans that are secured against property, with low loan-to-values (LTVs) attached. In the event of a default, the platform can take charge of the property and sell it to recoup investor capital if need be.
Finally, maintain a diversified portfolio by investing in a range of different property backed loans, alongside other types of investments such as equities, cash and bonds. This reduces the impact of any losses in one area of your portfolio.
2. Property market risk
Most adults can remember the Global Financial Crisis, which saw the value of UK properties drop by approximately 16% in 2008 alone[1]. Property values can fluctuate due to economic conditions, changes in demand, or shifts in interest rates. If the property securing a loan falls in value, it makes the collateral less valuable and could place investor capital at risk.
This risk can be minimised by investing in property loans with low LTVs. For example, Loanpad has an average LTV of 45.44% on all of our listed properties. This means that these property values would have to fall by 54.48% before the underlying collateral is affected.
3. Liquidity risk
Unlike listed shares, peer to peer loans are not instantly tradable. If you need access to your money before the loan term ends it may be difficult, depending on the type of account that you hold. Loanpad offers two accounts – Classic and Premium. The Classic account allows for daily withdrawals, offering the option of instant liquidity to investors. The Premium account pays a slightly higher interest rate but requires 60 days’ notice on any withdrawals subject to liquidity.
4. Platform risk
When you invest through a P2P platform, you are also exposed to the financial health and operational reliability of that platform. If the company behind the platform were to fail, your investments could be at risk of disruption or even loss. This risk can be managed by ensuring that you choose to invest in a platform which is regulated by the Financial Conduct Authority. You can also research your platform of choice on Companies House to check their most recent financial statements and ensure that they are keeping up with their disclosure requirements.
It is also possible to mitigate this risk by investing across a number of different peer to peer lending platforms, while also maintaining non-P2P investments.
5. Economic risk
Broader economic conditions such as high inflation, rising interest rates, or a slowdown in housing demand can affect borrowers’ ability to repay and the overall performance of property markets. While macro-economic events are beyond the control of the average investor, keeping on top of the latest financial news can offer some insight into potential red flags which might impact on certain areas of your investment portfolio. For example, rising credit card defaults may indicate that consumer credit investments are becoming riskier. Likewise, mortgage defaults could suggest looming issues in the property market.
Economic risk can also be mitigated by choosing relatively short-term loans, so that you are less exposed to long term economic shifts.
And as ever, diversification is essential to minimise your exposure to one particular sector.
[1] https://www.theguardian.com/money/2009/jan/06/house-prices-fall-in-december
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
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%.
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.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
Property-backed peer-to-peer lending has become an increasingly prominent segment of the P2P lending market in recent years. But what is it exactly?
In short, property-backed P2P lending refers to P2P loans which are secured by property. That property might be a residential development, commercial buildings, buy-to-let portfolios, or land with planning permission.
On these types of secured loans, the property acts as collateral. If a borrower defaults, the platform has the legal right to recover funds through the sale of the property itself. When assessing the value of property collateral, P2P lending platforms will assign a Loan-to-Value (LTV) which effectively states how much the platform is prepared to lend against the overall value of the property. As of September 2025, Loanpad’s average LTV was 45.04%. This means that in the event of a borrower default, the value of the property would have to fall by more than 55% before Loanpad’s share is impacted.
This collateral is what makes property-backed P2P lending different to unsecured loans. It provides investors with an extra layer of protection, although, of course, it doesn’t remove risk entirely.
How does property-backed lending work?
When a property developer or landlord applies for finance, they will approach a P2P lender with their plans. The platform then assesses the deal, taking into consideration elements such as the borrower’s track record, the property’s value, and the LTV.
If the platform is satisfied with the borrower’s credentials and the property collateral, the secured loan is listed on the platform. Investors can then choose to fund part of the secured loan.
For the duration of the loan’s term, investors will earn interest on their investment. This is typically paid monthly, quarterly or annually, depending on the platform.
At the end of the term time, the secured loan is repaid in full, and the investors can recoup their capital investment and either withdraw their money or use it to invest in another loan.
If the borrower fails to repay, the platform can enforce its charge on the property to recover investors’ funds.
The benefits of property-backed lending
For borrowers, there are a number of benefits associated with using a P2P lending platform to finance their next project.
- Speed. Traditional banks can take weeks or even months to approve a loan, whereas property-backed P2P lending platforms are often quicker.
- Flexibility. P2P lenders may consider projects that high street lenders view as too risky or unconventional.
- Short-term finance. P2P lenders and lending platforms are more comfortable offering secured loans with a shorter duration, of say six to 12 months, which suits developers who are bridging a funding gap.
For investors, property-backed P2P loans can offer attractive returns, with the reassurance of underlying security in case the borrower defaults.
Property-backed P2P lending also offers a way for retail investors to participate in the property market without directly owning or managing property. By lending to developers and landlords via online platforms, investors can earn interest while benefiting from the security of property as collateral.
While property-backed P2P lending is not risk free, it is possible to manage risk by choosing a reliable and regulated property-backed lending platform, and by carrying out your own due diligence before investing. This might involve checking the loan terms, the LTV, and the borrowers’ credentials on Companies House.
Done correctly, property-backed P2P lending can diversify your investment portfolio and help to support the British property industry, while earning competitive returns.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |
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.
| Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more. |