What is peer-to-peer lending?
Peer-to-peer (P2P) lending means lending money directly to businesses or individuals through an online platform, bypassing traditional banks. You earn interest on your loans — typically 6–12% annually — paid monthly or rolled up into your account.
Most P2P platforms offer an auto-invest feature that automatically deploys your money into new loans as they become available, making it genuinely passive once set up.
P2P lending is not as safe as a savings account. Borrowers can default, and if a platform fails, recovering your money can be difficult. Several UK P2P platforms have collapsed in recent years. Only invest money you can afford to leave tied up and potentially lose.
UK P2P platforms still operating in 2026
The UK P2P market has consolidated significantly. Several major platforms — including Ratesetter, Zopa (for P2P), and Funding Circle (retail) — have either closed their retail lending operations or exited the market entirely.
Platforms still accepting UK retail investors include Loanpad and Folk2Folk for property-backed lending. Both are FCA regulated. Always check the FCA register before investing with any P2P platform.
The IFISA — tax-free P2P lending
The Innovative Finance ISA (IFISA) allows you to hold P2P investments inside an ISA wrapper, making all interest completely tax-free. This is a significant advantage for higher rate taxpayers. Several UK P2P platforms offer IFISA accounts.
Unlike bank savings accounts, P2P lending investments are not protected by the Financial Services Compensation Scheme (FSCS). If the platform fails, you could lose your invested capital. This is a fundamental difference from cash savings and Premium Bonds.
How much can you realistically earn?
- Property-backed P2P: 5–8% annually, lower risk
- Business lending P2P: 8–12% annually, higher risk
- Consumer lending P2P: 6–10% annually
Pros
- Higher returns than savings accounts
- Passive with auto-invest
- Tax-free via IFISA
- Monthly income possible
- Diversification across many loans
Cons
- Not FSCS protected
- Borrowers can default
- Platforms can fail
- Money may be locked in
- Market has shrunk significantly
Our honest verdict
P2P lending offers genuinely attractive returns compared to savings accounts, but carries real risks that many guides understate. The UK market has contracted significantly — several major platforms have exited retail lending entirely.
For UK adults over 50, we would suggest treating P2P as a small portion of a broader income strategy rather than a primary income source. Never invest more than you can afford to lose entirely. Always check the FCA register before using any platform.