For savvy business owners and directors, finding tax-efficient ways to grow capital while supporting a business is a key financial strategy. Many are already familiar with the power of a Small Self-Administered Scheme (SSAS) – a bespoke pension scheme that can lend funds directly to the sponsoring business or invest in its commercial property. It’s a powerful tool for recycling capital within a business framework, all within a tax-advantaged pension environment.
But what if you want to support growing businesses—with similar tax efficiency, but without the complexity and cost of a SSAS? There’s another, often overlooked, route: the Innovative Finance ISA (IFISA).
The SSAS approach: A quick recap
A SSAS is a company pension scheme set up for a small group of people, typically directors or key employees of a family or small business. Its standout feature is the flexibility to invest in a wide range of assets, including:
- Lending to the sponsoring business (subject to strict rules).
- Purchasing commercial property for the business to use.
- Investing in equities, bonds, and other permitted assets.
The benefits are clear: contributions receive tax relief, growth is largely free from income and capital gains tax, and it facilitates direct investment back into the business ecosystem. However, a SSAS requires professional administration, trusteeship and can involve significant setup and ongoing costs. It’s a robust solution, but one that is generally suited to more complex, long-term business financing needs.
The IFISA: Bringing similar benefits within a more accessible wrapper
While a SSAS operates within the pension landscape, the Innovative Finance ISA sits within the ISA family. Its core function is to hold peer-to-peer (P2P) loans and cash within a tax-free wrapper. This is where the synergy with certain SSAS activities becomes apparent.
Think of the IFISA as a more accessible, liquid, and flexible cousin for business lending investments.
Through an IFISA platform like rebuildingsociety.com, you can use your annual ISA allowance to:
- Lend directly to UK businesses across a diversified portfolio.
- Earn interest that is completely free from UK Income and Capital Gains Tax.
- Support the SME ecosystem by providing vital growth capital to a range of companies.
Key benefits of using an IFISA for business lending:
- Tax-Free Returns: Just like a SSAS shelters growth from tax, the IFISA shields all your interest earned from business loans from tax. For higher and additional rate taxpayers, this is a significant efficiency gain.
- Accessibility & Lower Barriers: No need for trustees, complex deeds, or high setup fees. You can open an IFISA online in minutes, with much lower minimum investment levels compared to typical SSAS transactions.
- Diversification & Liquidity: Instead of making one large loan to a single business (as a SSAS might), you can spread your ISA allowance across multiple loans to different businesses, sectors, and risk grades. Some platforms also offer secondary markets for earlier exit.
- Simplicity and Control: Manage your investments through an intuitive online platform. You choose the businesses you want to support based on detailed credit assessments and your own risk appetite.
- Complementary, Not a Replacement: An IFISA doesn’t replace the need for a well-structured pension like a SSAS, which has unique benefits like tax-relieved contributions and commercial property investment. Instead, it complements it by providing an annual, tax-efficient allowance for direct business lending in a simpler format.
SSAS vs. IFISA: Choosing the right tool
| Feature | SSAS (Pension) | Innovative Finance ISA |
| Primary Purpose | Retirement savings with ultra-high flexibility | Tax-free income & growth from lending |
| Tax Relief on Input | Yes – on contributions | No |
| Tax-Free Growth/Income | Yes | Yes |
| Accessibility & Cost | Complex, requires trustees, higher cost | Simple, online, low minimums |
| Annual Allowance | Up to £60,000 | £20,000 (2025/26 ISA allowance) |
| Access to Funds | Generally at age 55 (rising to 57) | Capital and interest can be withdrawn |
The bottom line
If you’re a business owner or director who appreciates the strategic value of using tax-advantaged capital to fund businesses—a concept you may already use within a SSAS—the Innovative Finance ISA deserves your attention.
It offers a powerful way to deploy your annual ISA allowance strategically, earning tax-free returns while playing a direct role in funding the growth of Britain’s SMEs. It’s about using every tool in your financial toolkit to optimise your savings and impact.
Ready to explore how your ISA can work harder?
Discover how you can build a diversified portfolio of business loans within a tax-free Innovative Finance ISA at rebuildingsociety.com. Learn more about our Enterprise IF ISA here.
Capital at risk. ISA eligibility and tax rules apply. Past performance is not a reliable indicator of future results. This blog post is for informational purposes only and does not constitute financial advice. You should consider your own personal circumstances and seek independent advice if necessary.
