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Everything you need to know about Individual Savings Accounts, the different types available, and how the Innovative Finance ISA can help you earn tax-free returns on property bonds.
An Individual Savings Account (ISA) is a tax-efficient savings and investment wrapper available to UK residents. Any returns earned within an ISA -- whether interest, dividends, or capital gains -- are completely free from UK income tax and capital gains tax. For the 2025/26 tax year, the annual ISA allowance is £20,000, which can be split across different ISA types.
There are four main types of ISA available to UK investors. Each has different features, benefits, and rules.
A Cash ISA works like a standard savings account but with the benefit of tax-free interest. It is the simplest and most accessible form of ISA, offered by most banks and building societies.
A Stocks and Shares ISA allows you to invest in a wide range of assets including equities, funds, bonds, and investment trusts. Returns are free from income tax and capital gains tax.
Introduced in 2016, the IFISA allows you to hold peer-to-peer loans and certain debt securities (including property bonds) within a tax-free ISA wrapper. This is the ISA type used for Smart Legals bonds.
Available to those aged 18-39, the Lifetime ISA is designed to help you save for your first home or retirement. The government adds a 25% bonus on contributions up to £4,000 per year.
For the 2025/26 tax year, every UK resident aged 18 or over (16 for Cash ISAs) has an annual ISA allowance of £20,000. This is the maximum total amount you can pay into ISAs each tax year (6 April to 5 April).
You can split your £20,000 allowance across the different ISA types however you wish, as long as the total does not exceed the annual limit. For example, you could put £10,000 into a Cash ISA and £10,000 into an IFISA.
Important
Your ISA allowance resets at the start of each new tax year. Any unused allowance cannot be carried forward to the following year -- if you do not use it, you lose it.
The total across all ISA types must not exceed £20,000 per tax year.
Compare the key features of each ISA type to find the right option for your investment goals.
| Feature | Cash ISA | Stocks & Shares | IFISA | Lifetime ISA |
|---|---|---|---|---|
| Tax-Free Returns | check_circle | check_circle | check_circle | check_circle |
| Annual Allowance | £20,000 | £20,000 | £20,000 | £4,000 |
| Typical Returns | 1-5% | Variable | Up to 10% | Variable + 25% bonus |
| FSCS Protected | check_circle | Partial | cancel | check_circle |
| Capital at Risk | cancel | check_circle | check_circle | Depends |
| Fixed Returns | Some | cancel | check_circle | Some |
| Property Backed | cancel | Indirect | check_circle | cancel |
| Minimum Age | 16 | 18 | 18 | 18-39 |
Investing through our IFISA is simple and allows you to earn tax-free returns on property bonds.
Register on our platform and open your Innovative Finance ISA account online in minutes.
Select from our available property bonds, choosing the term and interest option that suits you.
Transfer your funds via bank transfer. Up to £20,000 per tax year can be invested tax-free.
All interest earned within your IFISA is completely free from UK income tax and capital gains tax.
All interest earned on your property bonds is completely free from income tax.
By eliminating the tax burden, your effective returns are significantly higher than taxed investments.
ISA income does not need to be declared on your self-assessment tax return.
Your IFISA investment is secured against UK property assets through a regulated security trustee.
Make the most of your annual ISA allowance and start earning tax-free returns on property bonds with a Smart Legals Innovative Finance ISA.