What is the difference between an IFISA vs Stocks and Shares ISA?

The Innovative Finance ISA (IFISA) and Stocks and Shares ISA are both investment products that are benefited by a tax wrapper, and both accounts typically have a medium/high risk profile.

Read more:download the IFISA guide

Despite these similarities, the IFISA and Stocks and Shares ISA do have some significant differences - differences which are good to know, especially when deciding which of the two ISAs is the most suitable for you and your investment portfolio.


The IFISA was introduced by the UK government in April 2016 and it allows investors to hold debt-based securities and loan funds through the peer-to-peer (P2P) lending market without paying tax on any interest or capital gains.

The Stocks and Shares ISA enables investors to allocate money to a range of investments - including individual stocks and shares, unit trusts, and investment trusts.

Here's a quick overview of the features of an IFISA vs Stocks and Shares ISA;

Stocks and Shares ISA
Aged 18 and over
4%+ (targeted)
Higher potential returns than an IFISA
Aged 18 and over, most suitable for experienced investors
4–8% (targeted)
Less volatility than a Stocks and Shares ISA
IFISA vs Stocks and Shares ISA: eligibility

Any UK resident aged 18 and over - who has not already opened and subscribed money to another of the same type of ISA in the current tax year - is eligible to open both an IFISA and a Stocks and Shares ISA. 

However, their suitability for particular investors may differ. Both an IFISA and a Stocks and Shares ISA can help to form part of a well diversified investment portfolio - but you should be well versed with the risks of both before investing, and the the type of ISA you choose should be matched to your personal risk profile.

It’s advisable to speak to an independent financial advisor when deciding which investment product is the best choice for you. 

Furthermore, your remaining annual ISA allowance can also impact your eligibility. If you have already met the threshold - which is £20,000 in 2023/24 - you will be ineligible to add new funds to either a Stocks and Shares ISA or an IFISA until the new tax year begins.

IFISA vs Stocks and Shares ISA: rates of return

Both the IFISA and Stocks and Shares ISA offer higher target returns than traditional savings accounts - such as the Cash ISA.

However, because they are investment products (and the Cash ISA is a savings product), they can not be compared like-for-like, and it's important to remember that your capital is at risk and returns are not guaranteed when investing into an IFISA or a Stocks and Shares ISA. 

The IFISA can offer target returns of between 4% and 8% generally - though this depends on the underlying asset.

The Stocks and Shares ISA can often offer higher potential returns than an IFISA (ranging from 4% per annum upwards), but with increased volatility. 

IFISA vs Stocks and Shares ISA: risks

Both the IFISA and Stocks and Shares ISA sit at the medium / high end of the risk spectrum, and they're both investment products, meaning your capital is at risk and returns are not guaranteed. However, because of increased volatility, the Stocks and Shares ISA often carries more risk. 

The stock market has its ups, but also its downs. This means the value of your investments could fall as well as rise. On the other hand, an IFISA is not subject to the fluctuations of the stock market - but there is still the risk that a borrower could default on their loans, and you could fail to get back the funds you invested. 

The IFISA is not covered by the Financial Services Compensation Scheme (FSCS), whereas the Stocks and Shares ISA is protected for up to £85,000 if the firm holding your money goes bust. It’s important to note that the FSCS protection for the Stocks and Shares ISA does not cover losses caused by poor investment performance. 



CARLTON Bonds are an IFISA provider specialising in fixed term property bonds.

Against a backdrop of low interest rates and a volatile stock market, the IFISA can provide an attractive investment opportunity for experienced investors. 

With the ability to hold peer-to-peer loans and debt-based securities, IFISA investments have the potential to generate higher rates of return than more traditional investment routes for investors with a greater appetite for risk.

To find out more, download our free IFISA guide.

The Innovative Finance ISA Guide