Are P2P loans and Innovative Finance ISAs FSCS protected?

No. An Innovative Finance ISA is not covered by the Financial Services Compensation Scheme, and the FCA's own rules for peer-to-peer agreements say so in terms: "An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free."¹

A Cash ISA is a different thing entirely. It is a deposit, and deposits are covered up to £120,000 per eligible person, per bank, building society or credit union, automatically and free.² That limit rose from £85,000 on 1 December 2025, which is why older pages still quote the lower figure.³

The ISA wrapper itself protects nothing. It is a tax treatment, not a guarantee. What decides whether you are covered is the product inside the wrapper and whether the firm's activity for you is regulated by the PRA or the FCA.⁴

Innovative Finance ISAs are not covered by the FSCS

An Innovative Finance ISA holds peer-to-peer loans rather than cash, or stocks and shares.⁵ The money you lend sits with borrowers, not with the platform, and no compensation scheme stands behind it. One platform states the position for its own product without hedging: "Capital is at risk and Kuflink is not protected by the FSCS."⁶ Another says that when you make a peer-to-business loan, the capital you lend to a borrower is not covered for compensation in the event of a loss by the Financial Services Compensation Scheme.⁷

What is covered is narrower than it sounds. Kuflink's own guidance lists "Managing your IFISA" as covered, which is about the administration of the account rather than the loans inside it.⁸ The distinction matters: a firm can be authorised, regulated and required to hold client money properly, and the investments it arranges can still be entirely unprotected.

The FSCS publishes a set of questions worth putting to any provider before money moves: is this investment product covered by FSCS, how much of my money is protected, and what would happen to my money if something happened to the business.⁴ For an IFISA the honest answers are no, none, and that depends on recovering the loans.

Why IFISA and P2P lending carry higher risk than a Cash ISA

A Cash ISA is a deposit with a bank, building society or credit union. The risk you take is the risk that the institution fails, and the FSCS exists precisely to answer that risk. A Cash ISA carries less risk to your capital, within FSCS limits, than an investment-based ISA.⁹

An IFISA replaces that with borrower risk. If a borrower defaults, the loss falls on you, not on a scheme. If the platform fails, the loans may still exist but collecting them, and getting the proceeds back to investors, is a process rather than a payout. The FCA's rules describe the risk in the plainest available words, and they apply to peer-to-peer agreements and portfolios held in an IFISA.¹

There is a second layer. Some investments are unregulated altogether, and independent guidance is blunt about the consequence: "If you put your money into them, you won't be covered by the FSCS, unless the investment was the result of negligent advice from an independent financial adviser."¹⁰ That exception is about the advice, not the investment.

The tax wrapper is the only thing the ISA adds. Gains inside an IFISA are tax free; the capital is not protected.¹

Cash ISAs: FSCS protection up to £120,000 per person, per bank

Deposit protection is automatic, free and does not need to be claimed for. The FSCS compensates eligible depositors up to £120,000 per eligible person, per bank, building society or credit union.² The same £120,000 per person or company, per authorised firm, appears across the scheme's own leaflets and the National Savings and Investments security pages.³

The products covered include current accounts, savings accounts, cash ISAs and savings bonds.¹² Providers state it on their own documents: one building society's Cash ISA key facts confirm the account is protected by the FSCS,¹³ another says simply "Protected by the Financial Services Compensation Scheme",¹⁴ and a third confirms "This protection extends to cash ISAs."¹⁵ A cash account inside an investment ISA can also be treated as a deposit and covered on the same basis as a savings account.¹⁶

Joint accounts get the limit per person, so a joint Cash ISA is protected up to £120,000 for each holder.³ MoneyHelper puts the pair together as £120,000, or £240,000 for joint accounts, per authorised firm.¹⁷

Is the £120,000 limit shared across all my accounts with the same bank?

Yes, and this is where most people are caught out. Accounts with banks in the same banking group that share a banking licence are treated as one bank, with the £120,000 limit applying across all of them.¹⁷ If you hold an individual account and a joint account within the same banking group, the compensation limit applies across all those accounts rather than to each separately.²

The test is the authorisation, not the brand on the door. Where a current account and a savings account share one firm reference number or authorisation number, they are classed as a single firm and the limit is shared across both.¹⁸ The FSCS protection checker applies protection at firm level, and it may be shared across brands under the same authorisation.²

Credit unions work the same way: the FSCS protects up to £120,000 in total across all accounts you hold with the credit union.¹⁹ Independent guidance states the rule as £120,000 per person, per institution, and notes the change from the previous £85,000.²⁰

Stocks and shares ISAs and investment protection

A Stocks and Shares ISA holds company shares, unit trusts and investment funds, corporate bonds and government bonds.²¹ The FSCS does not compensate you for those investments falling in value. What it can cover is the firm: if the provider fails and cannot return your investments, investment protection can apply, and independent guidance is explicit that this protection does not cover losses from your actual investments, only the company holding them.²²

That distinction is the single most misunderstood point about investment protection. A platform going bust is a different event from your funds performing badly, and only the first is capable of giving rise to a compensation claim. There is a separate page on what happens if an investment platform or pension provider fails and one on whether FSCS covers poor investment performance.

The £85,000 figure that still circulates belongs to this area, not to deposits. Independent guidance describes £85,000 of FSCS protection for negligent investment advice and fraud, available only if the adviser or firm who gave the advice is unable to meet the claim.¹⁸ Older pages quoting £85,000 for savings are simply out of date: the deposit limit rose to £120,000 on 1 December 2025.²⁰

IFISA or Cash ISA: how your money is protected in each

Set the two side by side and the difference is not one of degree.

A Cash ISA is a deposit. The FSCS pays automatically if the bank, building society or credit union fails, up to £120,000 per eligible person, per institution, and the scheme describes the process as automatic compensation.² The Bank of England's explanation of the scheme covers the same ground for deposits.¹² Building societies, credit unions and banks all appear in the scheme's deposit protection material on the same terms.²³

An IFISA is a loan book. There is no automatic compensation, no per-person limit to measure against, and no scheme standing behind the borrower. The FCA's rules state that you can still lose all your money.¹ The platform's own risk page says the same thing in its own words.²⁴

What protects an IFISA investor is disclosure and diversification, not compensation: the risk warnings a firm must give, the questions the FSCS suggests asking, and the fact that peer-to-peer lending is a regulated activity even where the loans are not protected.⁴ There is more on the mechanics and the risks in peer-to-peer lending and investment crowdfunding, and on the ISA wrapper itself in ISAs: a complete guide.

Are Junior ISAs protected by the FSCS?

A Junior Cash ISA is a deposit, so it is protected on the same basis as an adult cash ISA. One building society states on its Junior Cash ISA page that savings are protected, and adds the qualification that this is not the case with a Stocks and Shares Junior ISA.²⁵ Another provider's ISA guide makes the same point in the same terms.²⁶

The limit is the child's own: £120,000 per eligible person, per bank, building society or credit union, and it is not shared with a parent's accounts unless the accounts are held in the same name.² A Junior ISA holding peer-to-peer loans would sit outside protection in the same way an adult IFISA does, because the wrapper is not what decides it.

Where protection stops

The FSCS protects a range of financial products, each with its own limit to the amount of compensation it can pay.²⁷ That sentence is the whole architecture. There is no single limit and no single rule; there is a limit per product type, per firm, per person.

Some things sit outside entirely. The scheme cannot protect e-money or payment services firms.² Credit insurance, aviation insurance and goods in transit are among the insurance claims that are not eligible.²⁸ Money a debtor pays under an individual voluntary arrangement arranged by insolvency practitioners, who are not regulated by the FCA, is not protected either.³⁰

For an IFISA the position is simpler and harsher: there is no limit to measure, because there is no cover. The FSCS publishes a checker for deposits and a separate guide to investment protection, and both are worth using before money is committed.² If a firm cannot be found in the checker, the scheme's own guidance on what to do next is the place to start.³²