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
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All investments come with an element of risk attached. A stocks and shares portfolio can crash overnight, while newer alternatives such as cryptocurrency are notoriously volatile.
In peer-to-peer lending, the key risk is that the borrower could be unable to repay their loan. This would result in a default, and may result in investor losses, including capital losses.
However, at Loanpad, we have set a few key processes in place that reduce the risks for our investors and help to protect your investments.
- All of our loans are backed by property
We take collateral on every loan so that in the event of a borrower default, the underlying property collateral can be sold to recoup our investors’ collateral. Before any new loan is approved, we ensure that the underlying property collateral has a good chance of being sold in a timely manner if need be.
- First charge on every loan
A first charge is a legal right that gives one lender priority over others to claim money from a property if the borrower defaults. Loanpad takes a first charge on every loan, so we will be first in line to be paid if a loan goes into recovery proceedings. This is important as it gives us the best possible chance of being able to make our investors complete by repaying their capital investment. This is one of the reasons why Loanpad investors have not lost a single penny of their capital to date.
- Low LTVs
Loan-to-Value (LTV) is the percentage of a property’s value that you’re borrowing. For example, if you buy a house worth £100,000 and borrow £80,000, your LTV is 80 percent. The higher the LTV, the riskier the loan for the lender. Loanpad maintains very low LTVs in order to minimise lender risk. As of July 2025, the average Loanpad LTV was 44.46 percent. This means that the value of the property would have to decline by 55.54 per cent before our ability to recoup the capital investment is affected.
- Senior lending position
Loanpad’s lending model brings together established property lenders and retail investors, with the property lenders taking on the highest risk – or junior – part of each loan. Our retail investors invest in the senior part of the loan, which means that they are effectively shielded from the riskiest parts of the loan, but can still earn competitive returns. If a loan goes bad, the property lenders will incur the greatest losses, while the retail investors will be repaid first.
- Ongoing due diligence
Every new loan that is onboarded to the Loanpad site is subject to intensive due diligence focusing on property valuations, borrower experience, and the legal and security aspects of each loan. This due diligence continues even after the loan has been approved, to ensure that the borrower is still able to make repayments, and that everything is going according to plan. By keeping such a close eye on every loan, Loanpad is able to actively manage the loanbook and identify any potential problems ahead of time.
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P2P INSIDER
Supercharge your understanding of Peer to Peer investing todayTwo 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.”
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How P2P Lending Enhances Portfolio Diversification
Savvy investors understand the benefit of a diversified portfolio – especially during times of economic volatility. The post-Covid investment landscape has been characterised by uncertainty and has led many seasoned investors to reimagine their portfolios in a way that is better suited to the current investment landscape.
For some, this may mean choosing more fixed income opportunities and carving out a small portion of high-yielding investments.
Peer-to-peer lending can offer fixed returns which are competitively priced. As with investment products, investors should always carry out their own due diligence to ensure that they have chosen a regulated platform which has a good reputation in the market.
Why diversification matters
Diversification is a cornerstone of sound investing. By spreading investments across different asset classes, sectors, and geographies, investors can reduce the risk of large losses from any single investment. P2P investing is not correlated with the stocks and shares market, or with the public bond markets, so it offers a way to diversify your money outside of the mainstream. If the stocks and shares portion of your investment portfolio sees a sudden drop in value, the P2P segment of your portfolio is unlikely to be impacted.
Creating a diversified portfolio can also mean choosing a variety of yield opportunities. For example, the majority of investors will choose to keep a certain amount of their investment portfolio in a low-interest cash account, or in low-paying government bonds. These types of investments exist at the lower end of the risk spectrum and offer some reassurance to investors that in the event of a market crash, at least one part of their portfolio will be shielded from the risk of capital loss.
For most investors, a diversified portfolio is about creating balance. Higher-yielding investments often come with higher risk. It is possible to earn double digit returns but there is a risk that in the event of a borrower default, some or all of the investor’s capital investment could be lost. The risk of capital loss has to be weighed up against the opportunities to earn a higher return. In a well-diversified portfolio, higher risk investments should be balanced out by the inclusion of lower-risk strategies elsewhere.
Diversification within P2P
It is also possible – and advisable – to add diversity within the P2P segment of your investment portfolio. You can do this by investing your money with more than one platform, and by choosing to spread your investments across multiple P2P loans, rather than manually selecting one loan at a time.
By spreading your investment, you are also reducing the risk of capital loss. If all of your money is tied up in one P2P loan, and the borrower goes into default, you could lose some or all of your initial investment. However, if you are invested in 100 loans and one of them goes into default, that would represent a maximum loss of one per cent of your overall portfolio.
Additional P2P diversification can be added by splitting your money across several different types of P2P loans. It is possible to use P2P investing to access property-backed loans, consumer loans, business loans, and even litigation loans. Research the market and ensure that you have all of the information you need before committing your funds.
P2P lending can be a valuable component of a diversified investment portfolio. By adding an alternative asset class that offers the potential for higher returns and lower correlation to traditional investments, retail investors can enhance their portfolio’s risk-return profile while maintaining a focus on long-term growth.
| 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. |