Which type of ISA allows investment in peer-to-peer loans?

The type of ISA that allows investment in peer-to-peer loans is the Innovative Finance ISA. This specific ISA was introduced to enable investors to earn tax-free returns on investments made in alternative finance, including peer-to-peer lending platforms. The Innovative Finance ISA provides a way for individuals to potentially receive higher returns than traditional savings accounts or cash ISAs by directly funding loans for individuals or businesses through these platforms.

While Stocks and Shares ISAs focus on investments in equities and bonds, and Help to Buy ISAs are designed to assist individuals saving for their first home, neither of these options facilitates investments in peer-to-peer loans. The Lifetime ISA, on the other hand, aims at encouraging long-term savings for first-time home purchases or retirement but does not cover peer-to-peer lending either. Thus, the Innovative Finance ISA is uniquely suited for those looking to invest in peer-to-peer loans, fulfilling a specific market need for alternative investment opportunities within the ISA framework.