The UK Muslim Guide To The Innovative Finance ISA (IFISA)

Most UK Muslims have heard of ISAs. Fewer have heard of the IFISA.

That’s a problem, because for Muslims looking to earn halal returns without the stock market’s volatility, the IFISA might be the most underused tax wrapper in the country.

In this guide we’re going to cover everything you need to know: what an IFISA actually is, why most of them aren’t halal and exactly which ones are.

New to ISAs altogether? Start with our complete guide to ISAs for UK Muslims for a full breakdown of every ISA type, which ones are halal, and how to use them to build long-term tax-free wealth.

What is an IFISA?

IIFISA stands for Innovative Finance ISA. It’s one of five types of Individual Savings Account available to UK residents:

• Cash ISA
• Stocks and Shares ISA
• Innovative Finance ISA (IFISA)
• Lifetime ISA (LISA)
• Junior ISA (JISA)

Like all ISAs, the IFISA sits inside the UK government’s annual tax-free allowance of £20,000. Any returns you earn inside it: income, profit, growth  are completely sheltered from UK income tax and capital gains tax. For life.

What makes the IFISA different from its siblings is what you’re actually investing in.

A Cash ISA holds your money in a savings account. A Stocks and Shares ISA holds equities, ETFs, and funds. An IFISA holds alternative investments, most commonly loans made directly to individuals, businesses, or property developers through peer-to-peer (P2P) lending platforms.

The idea is straightforward: instead of going through a bank, you lend money directly to borrowers, earn a return on that lending, and keep all of it tax-free inside the ISA wrapper.

How does an IFISA work in practice?

Here’s the basic flow:

• You contribute up to your £20,000 annual ISA allowance into an IFISA platform.
• The platform deploys your money into loans or financing deals, usually secured against property or other real assets.
• You earn a return on that deployment, typically paid monthly or quarterly.
• All returns are tax-free within the ISA wrapper.
• At the end of the investment term (typically 1-5 years), your capital is returned, subject to the performance of the underlying deals.

That last point matters. Unlike a Cash ISA, your capital is not guaranteed. IFISAs sit outside the Financial Services Compensation Scheme (FSCS). If deals go wrong, you could get back less than you put in. More on that in the risks section.

Are IFISAs halal?

This is the right question to ask, and the answer most guides skip past.

The short answer: the IFISA wrapper itself is neutral. What determines whether it’s halal or haram is the underlying structure of the investments inside it.

Think of the ISA like a container. The container has no religious status. What you fill it with does.

Why most IFISAs are haram

The majority of IFISA providers in the UK operate on an interest-based model.

The platform lends your money to borrowers and charges them interest. That interest flows back to you as your return. You’re functioning as a lender: you are earning riba.

From an Islamic finance perspective, this is clearly impermissible. It doesn’t matter that the ISA is tax-free, or that the loans are secured against property, or that the platform is regulated by the FCA. If the underlying contract is interest-based, it’s haram.

This rules out the overwhelming majority of IFISA providers: Kuflink, easyMoney, Lendwise, CapitalRise, and most others you’ll come across in mainstream comparison sites.

What makes an IFISA halal?

A Shariah-compliant IFISA replaces the interest-based lending model with Islamic finance contracts. Instead of charging the borrower interest, returns are generated through Sharia-compliant structures rather than interest-bearing loans. The mechanics are asset-backed or trade-based, designed to link returns to permissible transactions. All investments are screened and reviewed against Sharia principles.

For a halal IFISA to be genuinely permissible, it needs:

• Shariah-compliant underlying contracts (not just ‘ethical’ branding)
• A recognised Shariah board that has reviewed and approved the structure
• Ongoing compliance audits, not a one-time fatwa from years ago

Halal IFISA options in the UK (2025)

As of the 2025/26 tax year, there are two Shariah-compliant IFISA options worth knowing about in the UK.

Cur8 Capital: GBP Income Fund IFISA

Cur8 Capital is the asset management arm of IFG and it offers the closest thing to a genuinely comprehensive halal IFISA currently available in the UK.

The IFISA is accessed through Cur8's GBP Income Fund. Here’s what makes it different:

• Asset-backed: your money is deployed into a variety of assets including real estate.
• Shariah-certified: the fund structure uses Islamic finance contracts and has been reviewed by a Shariah board.
• Income-focused: designed for investors who want regular, predictable returns rather than capital growth.
• Tax-free wrapper: held within an IFISA, all returns are sheltered from UK income tax and capital gains tax.
• UK-focused: your money finances real property deals in Britain through halal home finance providers like StrideUp and Offa.

The structure is worth understanding. The Cur8 IFISA invests through Shariah-compliant crowdfunding debentures. A debenture is a formal debt security issued by a business. In simple terms, your money is deployed into real asset-backed deals under defined terms, with returns paid according to those terms and capital repaid at maturity. It is structured to avoid interest at every level: returns come from permissible, asset-backed transactions, not from interest-bearing loans.

One thing that makes the GBP Income Fund particularly meaningful for Muslim investors: your money goes to work funding Islamic finance companies that are expanding access for underserved communities. That includes Offa and StrideUp, which offer halal home finance to Muslims who can’t use conventional mortgages, and Ayan, which provides Shariah-compliant car finance. You are not just earning a return. You are helping more Muslims access finance that works for them.

For UK Muslims who want a regular income stream, genuine Shariah compliance, and the full tax advantages of an ISA, this is an option worth considering.

Nester

Nester takes a different approach to Cur8. Rather than a pooled fund, Nester is a peer-to-peer platform where investors can discover and invest in specific property investment opportunities, so you’re choosing individual deals rather than putting money into a single fund that manages allocation for you.

Nester provides buy-to-let, refurbishment, and bridge financing for corporates, with all investments secured on UK real estate. The platform targets returns of up to 9% per year, with a minimum investment of £1,000 to open an IFISA.

Nester also uses Islamic financing contracts rather than interest-based lending, and offers another credible halal option for investors looking to diversify within the IFISA wrapper.

IFISA vs Cash ISA vs Stocks & Shares ISA

Where does an IFISA fit in your overall ISA strategy? Here’s a quick comparison:

The pattern is clear. IFISAs sit between Cash ISAs and Stocks & Shares ISAs on both the risk and return spectrum. They’re not a replacement for either. They are a complement.

A sensible approach for most Muslim investors might look like: a halal Stocks & Shares ISA for long-term growth, a halal Cash ISA (or emergency fund) for liquidity, and an IFISA for income and diversification away from equity markets.

The tax case for using your IFISA allowance

If you’re still receiving investment income outside of an ISA, you’re likely paying more tax than you need to.

In recent years, the tax-free allowances outside ISAs have been cut significantly:

• The dividend allowance fell from £2,000 in 2022 to just £500 in 2024.
• The capital gains tax annual exempt amount dropped from £12,300 to £3,000 over the same period.
• In the 2025 Autumn Budget, the Cash ISA allowance for under-65s was cut to £12,000  but the total ISA allowance across all types stays at £20,000.

Inside any ISA, none of this applies. Returns are completely ring-fenced from HMRC: income tax, CGT, all of it. The longer you invest, the more that shelter compounds.

For IFISA investors earning income returns of 5-9% annually, the tax savings inside the wrapper can be substantial over 10-20 years  especially for higher or additional rate taxpayers.

Risks to understand before you invest

An IFISA can be a strong addition to a halal investment portfolio. But you should go in with clear eyes on the risks:

None of these risks make IFISAs unsuitable. They just need to be approached thoughtfully.

IFISA rules for the 2025/26 tax year

A few important rules to keep in mind before you invest:

• Annual allowance: up to £20,000 across all ISA types combined. You can split this however you like between Cash, Stocks & Shares, IFISA, and Lifetime ISA.
• Multiple IFISAs: you can now open and contribute to more than one IFISA in the same tax year, as long as you stay within the £20,000 total limit.
• Unused allowance: if you don’t use your full allowance before 5 April, it’s gone. It does not carry forward.
• Eligibility: you must be 18 or over and a UK resident for tax purposes to open an IFISA.
• ISA transfers: you can transfer existing ISA funds (from Cash or Stocks & Shares ISAs) into an IFISA without it counting towards your annual allowance. Partial transfers are now permitted.
• FSCS: IFISAs are not FSCS-protected. This is a key distinction from Cash ISAs.

Frequently asked questions

Can I hold an IFISA alongside other ISAs?

Yes. You can hold multiple ISA types in the same tax year. So you could put £10,000 into a Stocks & Shares ISA and £10,000 into an IFISA in the same year, for example. The only condition is that your combined contributions across all ISAs don’t exceed £20,000.

Are the returns from a halal IFISA really tax-free?

Yes. All returns inside any ISA wrapper, including income from asset-backed financing in an IFISA,  are free from UK income tax and capital gains tax. The tax treatment applies to the wrapper, not the type of return.

What kind of returns can I expect?

Shariah-compliant IFISAs typically target returns in the range of 5-9% per annum, depending on the platform and the deals involved. These are target returns, not guarantees. Actual returns depend on the performance of the underlying investments.

Do I pay Zakat on money inside an IFISA?

Yes. The ISA’s tax-free status under UK law doesn’t affect your Islamic obligations. Zakat is due on zakatable assets inside your ISA, including cash held on the platform, your share of any financing deals, and any accumulated returns that meet the nisab threshold. Calculate it as part of your annual Zakat assessment.

Is the Cur8 IFISA the same as the GBP Income Fund?

The IFISA is the tax wrapper. The GBP Income Fund is the underlying investment held within it. When you invest in the GBP Income Fund, you can choose whether to invest inside an IFISA. The ISA wrapper then means your returns come out completely tax-free.

Is an IFISA right for you?

The IFISA is not for everyone. If you need money available at very short notice, like within days, an easy-access Shariah-compliant savings account is probably a better fit.

But if you can plan around a notice period, that’s a different story. Cur8’s IFISA offers a 3-month, 6-month, or 12-month notice term depending on the deal, so it is not the illiquid years-long lockup that some investors assume. It suits people who want income from their savings but don’t need everything back tomorrow. If your priority is long-term equity growth, a halal Stocks & Shares ISA is still your workhorse.

Shariah compliant IFISAs are worth considering if you are looking for:

• Tax-free income returns above what savings accounts offer
• Exposure to real UK property deals without buying property directly
• Diversification away from equity markets

If you want to learn more about Cur8 Capital’s IFISA eligible GBP Income Fund, head over here.