What Is an Innovative Finance ISA?

An Innovative Finance ISA is one of the four types of ISA listed by gov.uk, alongside the cash ISA, the stocks and shares ISA and the Lifetime ISA. gov.uk says it can include peer-to-peer loans, which are loans given to other people or businesses without using a bank, and some other investments. For 2026-27 it uses the same overall allowance of £20,000 as every other ISA, and gov.uk says you do not pay tax on income or capital gains from investments in an ISA.

The site's rules data was last checked against gov.uk on 26 September 2026. Figures typed in this guide may not yet reflect a later change, and the descriptions of gov.uk pages are summaries that may also lag. The current figures are on the ISA rules at a glance page. General information only, not financial advice.

What is an Innovative Finance ISA?

The main GOV.UK page on Individual Savings Accounts says there are four types of ISA: cash, stocks and shares, innovative finance and Lifetime. That page does not define the innovative finance type. The definition is on the GOV.UK page on how ISAs work, which says Innovative Finance ISAs include:

peer-to-peer loans, described as "loans that are given to other people or businesses without using a bank";
"crowdfunding debentures", described as investing in a business by buying its debt;
funds where the notice or redemption period means they cannot be held in a stocks and shares ISA;
cryptoasset exchange traded notes.

In plain words, the account is a tax wrapper. What sits inside it is a loan or a similar investment rather than a bank deposit or a quoted share. gov.uk introduces the list with the word "include", and the pages read do not give a fuller definition.

How does it differ from a cash ISA or a stocks and shares ISA?

The differences are in what the account holds. gov.uk describes a cash ISA by the cash held in it and a stocks and shares ISA by the investments held in it. An Innovative Finance ISA holds the items in the list above. The site's guide to the different types of ISA sets the four types side by side.

What does not differ, according to gov.uk, is the shared allowance and the tax treatment. The annual limit is shared across every ISA a person pays into, whatever the type, and the tax rules in the next sections apply to ISAs generally. The pages read do not give an Innovative Finance ISA a separate allowance.

Who can open one?

The GOV.UK page on types of ISA says you must be 18 or over to open an ISA, and that if you are opening a Lifetime ISA you must also be under 40. It also says you must be resident in the UK, or, if you do not live in the UK, a member of the armed forces, a Crown servant (for example diplomatic or overseas Civil Service) or their spouse or civil partner.

That page does not add a condition specific to Innovative Finance ISAs, and the pages read do not say which providers offer them. The GOV.UK page on how to open an ISA lists the places you can get an ISA from, including banks, building societies, stock brokers, peer-to-peer lending services and crowdfunding companies, and says you will need your National Insurance number. It tells you to contact your provider directly for more information.

How does the allowance apply?

gov.uk says that every tax year you can save up to £20,000 in one account or split the allowance across multiple accounts. The tax year runs from 6 April to 5 April. Its own example mixes a cash ISA and a stocks and shares ISA to show the split, and gov.uk says your ISAs do not close when the tax year finishes (all from how ISAs work).

So money paid into an Innovative Finance ISA uses part of the same £20,000 as money paid into any other ISA. The pages read do not say you must pay in every year. The limit is reviewed on the site's ISA rules page, and the ISA calculator can be used to see how a split across accounts adds up. For changes that have been announced, see the guide to upcoming ISA changes.

How is tax applied?

gov.uk says you do not pay tax on interest on cash in an ISA, or on income or capital gains from investments in an ISA. It adds that if you complete a tax return, you do not need to declare any ISA interest, income or capital gains on it (how ISAs work). The page does not name the Innovative Finance ISA in that sentence, so this guide states it for ISAs as a group.

The GOV.UK page on withdrawing your money says you can take your money out of an ISA at any time, without losing any tax benefits.

What do the pages say about risk and protection?

The gov.uk pages read for this guide say nothing about the investment risk of an Innovative Finance ISA or about FSCS protection for it. This guide therefore does not describe the level of risk.

The FSCS page on investments says: "If you have an investment (or you were advised to invest) and the provider or adviser has gone out of business, you may be able to claim compensation with FSCS." It says protection depends on the product and that some investment products are not protected at all. It also says the PRA or the FCA must have authorised the provider or adviser, and that FSCS cannot accept claims for poor investment performance. The page does not mention peer-to-peer lending or Innovative Finance ISAs, so it does not say whether they are covered. The FSCS limits on that page depend on the date the firm failed, and the page refers readers to a separate FSCS guide for product-by-product detail.

The FSCS page also says investment values can fall as well as rise. The pages read do not say how easily the investments inside an Innovative Finance ISA can be sold or got back early, or how long that can take, so that is a question for the provider.

Can it be transferred or withdrawn from?

On transfers, the GOV.UK page on transferring your ISA says to contact the provider you want to move to and fill out an ISA transfer form. It says you can move savings to a different type of ISA or the same type, and that withdrawing the money instead means you cannot reinvest that part of your tax-free allowance.

For this type specifically, gov.uk says: "You can transfer cash from your innovative finance ISA to another provider," but other investments may not be transferable, and it says to ask your provider how long a transfer of investments will take. It gives 15 working days for transfers between cash ISAs and 30 calendar days for other types of transfer, and says providers may set their own transfer restrictions and may charge. For the general process, see the guide on how to transfer ISA accounts.

On withdrawals, gov.uk says to check the terms of your ISA for any rules or charges. The withdrawals page does not mention Innovative Finance ISAs or notice periods for peer-to-peer investments. It describes a "flexible" ISA as one where you can take out cash and put it back in the same tax year, and says your provider can tell you if yours is flexible; see flexible ISAs explained.

What to check

What exactly the account holds: loans, debentures, funds or other investments.
Whether the provider is authorised by the FCA, and whether the investments are covered by the FSCS (the FSCS page says this depends on the product).
What happens to the money if a borrower does not repay, or the provider stops trading.
Whether money can be taken out at any time, or only after a notice or redemption period.
Whether the account is flexible and what charges apply to withdrawals or transfers.
How any income is paid, and whether a quoted rate is a fixed term, a projection or an actual past figure.
The current figures on the ISA rules page, compared with gov.uk.

Frequently asked questions

Is an Innovative Finance ISA the same as a cash ISA?

No. gov.uk lists them as separate types. A cash ISA holds cash, while gov.uk says Innovative Finance ISAs include peer-to-peer loans, crowdfunding debentures, certain funds and cryptoasset exchange traded notes.

Does the Innovative Finance ISA have its own allowance?

The pages read do not give it one. gov.uk says the £20,000 annual limit can be saved in one account or split across multiple accounts.

Is money in an Innovative Finance ISA protected by the FSCS?

The pages read do not say. The FSCS page on investments says protection depends on the product and that some investment products are not protected at all, and it does not mention Innovative Finance ISAs.

Can I move an Innovative Finance ISA to another provider?

gov.uk says you can transfer cash from it to another provider, but other investments may not be transferable. It says to ask your provider how long a transfer will take.

This guide does not constitute financial advice. Your personal situation, tax position, and savings goals may mean different strategies are appropriate. Consider speaking to a regulated financial adviser if you are uncertain.