Loanpad Innovative Finance ISA

A Loanpad ISA is an innovative finance ISA (IFISA). It is not a savings account. The money you put in is lent out to property borrowers, and Loanpad's own terms state that when you make loans using your Loanpad ISA you are making an investment and your capital is at risk¹. The ISA wrapper means interest earned inside it is free of income tax and capital gains tax while the money stays in the wrapper¹.

The ISA itself is only one part of the arrangement. Loanpad runs a peer-to-peer lending platform that matches investors with borrowers, and its only role is to match them and to arrange, administer and enforce the loans². The borrowers are property developers, bridging and business borrowers looking for shorter-term finance over 3 to 24 months³. Your ISA holds peer-to-peer loans and cash, and nothing else¹.

Two things follow from that, and they matter more than anything else on this page. First, the returns depend on borrowers repaying, and repayment is not guaranteed¹. Second, the Loanpad ISA is not covered by the Financial Services Compensation Scheme¹. If you want a product where a deposit is protected up to a set limit, this is a different kind of thing altogether, and the ISAs guide sets out the alternatives.

What it is and who it is for

An ISA is a tax-advantaged savings product providing relief from tax to individuals⁵. Innovative finance ISAs are a type of ISA that lets you use your ISA allowance for peer-to-peer lending, and the Financial Ombudsman Service describes them as sometimes called crowdfunding ISAs⁶. They were designed to let people invest in more long-term, less liquid investments and cash, including crowdfunding debentures, alternative finance arrangements and peer-to-peer lending⁷.

The IFISA has existed since 6 April 2016. The government consulted in 2015 on allowing peer-to-peer loans to be held in an ISA from that date, and set out plans for a new component to be known as an Innovative Finance ISA allowing loan-based crowdfunding investments to be included in ISAs⁸. It is most commonly used for peer-to-peer lending, which matches up investors with borrowers, who could be individuals, businesses, or property developers¹⁰. Loanpad's ISA holds peer-to-peer loans and cash¹⁰, and the platform provides property finance to borrowers looking for shorter-term (3 to 24 months) property development, bridging or business funding loan types and terms¹⁰.

Loanpad's version is aimed at people who want ISA tax treatment on peer-to-peer lending rather than on cash savings or funds. It suits someone who is comfortable with the idea that their money is lent to property borrowers for a period, that it may not be immediately available, and that they could get back less than they put in. It does not suit someone who needs the money back on a set date, or who wants the deposit protection that comes with a cash ISA. If you are weighing it against other ISA types, Innovative Finance ISAs covers the category, and Innovative Finance ISA or Stocks and Shares ISA sets the two side by side.

How it works

Loanpad describes its ISA as a flexible ISA, so you can withdraw money and replace it in the same tax year without the replacement counting towards your yearly ISA allowance⁴. The tax year runs from 6 April one year to 5 April the next¹. The flexibility only covers replacements made in the same tax year: money you take out and put back in a later year counts against that year's allowance.

The ISA holds peer-to-peer loans and cash¹. Within the ISA, Loanpad offers a Classic Account and a Premium Account, and you can fund one or both¹¹. The Classic Account is described as offering free access any time¹¹. Interest is paid daily to the ISA cash account¹¹.

Money that has not yet been lent sits in a cash account. Loanpad says that if you ask to withdraw money from your cash account it aims to process this within one business day, although from time to time it may take up to three business days⁴. Money already lent to a borrower is a different matter: it has to be repaid or sold before it can come back to you, which is why the account's access terms and the loanbook's behaviour are not the same thing.

There is one structural point worth knowing. Loanpad states that one of its group companies can and routinely does invest on the platform as a lender, and that this is expected to be less than 1% of the loanbook⁴. That is a small share, but it means the platform and a lender on it are not entirely separate parties.

How the fees and charges work

Loanpad states that it will not charge investors any fees, with the exception of the Early Sale Queue Fee and any Loanpad ISA fees². On its own account-opening guidance it puts the same point more simply: asked whether it charges a fee, it answers no⁴. The practical position is that the headline cost of holding the ISA is low, and the charges that exist are attached to particular events rather than to the account sitting there.

The charges that can arise are these:

• Transfers in. Loanpad does not charge you for arranging a transfer of an ISA to it, but the existing ISA manager may charge you for the transfer out¹.
• Transfers out. If you move funds out of your Loanpad ISA to another ISA provider, you may be charged a fee in accordance with the fees published on Loanpad's website¹.
• Early sale. The Early Sale Queue Fee applies under Loanpad's investor terms².
• Repairing an invalid ISA. If something has gone wrong with the ISA's compliance, Loanpad says it will first see if it can repair the ISA to bring it in line with ISA rules, and that there may be a fee for this⁴.

The provider's site carries today's figures for any of these, and they are not repeated here. For context on what ISA charges look like elsewhere, platform fees on stocks and shares ISAs can be charged at a flat rate or on a percentage value of your funds¹², and some providers charge exit fees of £15 to £30 per holding while most charge nothing¹³. Those are other products' charges, not Loanpad's, and they are given only to show the shape of the market.

Who can apply and how to apply

You must be 18 or older and a UK resident, or in the diplomatic or overseas civil service, or the partner of someone who is⁴. Loanpad's ISA terms put it as being resident in the United Kingdom for tax purposes, or having general earnings from overseas Crown employment, or being married to or the civil partner of such a person¹. The ISA is registered in your name alone and cannot be held jointly with anyone else¹.

There is a step before the ISA. Loanpad says that, like all its accounts, you start by opening a standard Loanpad cash account, and it is not possible to have an ISA account without one⁴. From there you register, fill in an ISA application, and fund the ISA in a Classic or Premium account, or both¹¹. You can transfer ISAs you hold with other providers to Loanpad, and transferring previous years' ISAs will not affect your current year's allowance¹¹. Inward transfers are accepted in cash only, and the balance must be at least £500¹.

A few conditions are worth setting out plainly:

• Subscriptions to multiple ISAs of the same type, with the exception of Lifetime ISA, within the tax year are allowed¹.
• You can cancel within 14 days of agreeing to the ISA terms¹.
• Cancellation rights do not apply if you have made a lending offer that remains allocated, a loan agreement has been made, or a transfer of previous years' subscriptions has been received¹.
• If you move abroad, you cannot put money into an ISA once you are no longer UK resident, unless you are replacing ISA money under the flexible ISA rules⁴.

Transfers out are processed within a reasonable period that must not exceed 30 calendar days¹. If you are moving an ISA from somewhere else, How to transfer an ISA walks through the process, and Does transferring an ISA use my allowance? answers the allowance question.

How your money is protected

This is the section to read twice. Loanpad states that the Loanpad ISA is not covered by the Financial Services Compensation Scheme¹, and that money lent to borrowers through the platform will not be covered by the scheme either². Its own guidance repeats the point: Loanpad, in line with the peer-to-peer industry, is not covered by the FSCS⁴. Holding your investment within a Loanpad ISA does not reduce the risks associated with that investment or guarantee returns¹¹.

What protection does exist is of a different kind. All of the money in Loanpad cash accounts is kept in a completely ring-fenced Barclays Bank UK account in line with FCA rules⁴. That is client money protection, which is about keeping your uninvested cash separate from the firm's own money, not about compensating you if a borrower fails to repay. Loans are secured: Loanpad arranges for security to be granted by the borrower in favour of a security trustee in the form of a legal mortgage over the borrower's freehold or leasehold property², and it says it will take steps to recover a loan by selling the borrower's property⁴. Security is not a guarantee. Property values can fall, recovery takes time, and the process can produce less than the amount owed.

If Loanpad itself were to wind down, the ISA terms state that your loan agreements will remain enforceable and you will not lose the ISA status of funds in your Loanpad ISA¹. Loanpad would notify you within 30 calendar days that it had ceased to be an ISA manager and advise you of your right to transfer¹, and its guidance says it would give 30 days' notice before it stopped functioning as an ISA provider⁴.

Two further rules apply when an ISA holder dies. The ISA is designated a continuing account of a deceased investor, so no more money can be added but the ISA tax advantages continue during estate administration⁴. Interest arising after the date of death up to closure is exempt from tax⁴. If, after three years, administration is ongoing and the ISA has not been closed, it ceases to be a continuing account and later income or gains become taxable in the hands of the estate⁴. If the investor becomes bankrupt, the ISA is closed with effect from the date the trustee's appointment takes effect, and no further tax benefits may be received¹. What happens to an ISA when someone dies covers the general rules, and How your ISA is protected explains where FSCS cover does and does not apply.

Problems, complaints and getting help

If something goes wrong with the ISA itself, the first thing to know is that an ISA that breaks the rules can be unwound. Loanpad says it will first see if it can repair the ISA to bring it in line with ISA rules, and that there may be a fee for this⁴. If repair is not possible, part or all of the ISA will officially become void and you may have to pay tax, with HMRC contacting you to confirm the details⁴. If more than the allowance has been put in, Loanpad says HMRC can be told using the ISA helpline on 0300 200 3312⁴. When an ISA subscription breaks the rules explains how that process works.

For a complaint, Loanpad asks you to speak to the person or people involved first, and then to make a formal written complaint to its registered office or by email to complaints@loanpad.com¹⁴. It says you can expect a letter or email within three working days of it receiving your complaint, and that the individual handling it will send a detailed written reply within 14 days¹⁴. If you ask for a review, Loanpad says it will let you know the result within five days of the end of the review¹⁴.

If the complaint has not been resolved within eight weeks, or you are unhappy with the final response, you can refer it to the Financial Ombudsman Service¹⁴. If you contact the ombudsman after receiving a final response letter, you need to do so within six months of receiving that letter¹⁴. The ombudsman service handles complaints about ISAs, including innovative finance ISAs⁶. Its published complaints data for the first quarter of 2026/27 records 392 complaints opened about stocks and shares ISAs and 620 about cash ISAs including cash lifetime ISAs and help to buy ISAs¹⁵; the equivalent cash ISA figure a year earlier was 391¹⁶. Those figures cover the whole market, not Loanpad.

Free, impartial help is available if the problem is wider than the ISA. Debt advice services can help with completing forms, complaint procedures or applications on your behalf¹⁷. If a firm becomes insolvent, the Insolvency Practitioners Complaints Gateway takes complaints from customers, consumers, creditors, employees, directors, shareholders and others¹⁸. And if you are comparing what you would be giving up by moving money into a peer-to-peer ISA, Cash ISA vs stocks and shares ISA and ISA fees and charges set out the alternatives. The Loanpad page covers the provider itself.