However in a cash ISA interest is always tax-free - maybe read this?
As has mentioned by Muttley, you can get better interest rates elsewhere (e.g. 5% a year on fixed amounts). This example is outside the ISA tax wrapper, but you have an annual allowance on interest (depending on your current income tax level) anyway.
I think the ISAs you are referring to in your post are stocks and shares ISAs. This is a means of investing within the stock market that protects your returns from any tax. There is a general school of thought that, on average, the market goes up - so over a long period of time you can average 5-10% a year returns. So yes, you can put in xyz amount and end up with £100k given the right time and market circumstances. You could, however, end with less than you put in if the markets were to fall in value.
Longer term, I’d endure the money is in an isa. I’m a higher rate tax payer (well not this year as I am a student) and so it’s only £500 tax free. So having savings already in cash Isa’s means I can ignore them.
Also premium bonds are tax free too on winnings.
I am getting 5% on my 5 year rate setter account and that is an isa.
With cash you are insured up to £85K, there are no such guarantees with P2P lending (ie; if the platform and/or multiple borrowers fail you could lose all of your money).
That is why you are paid a 5% "premium", but I would argue that it is nowhere near enough considering the incredible amount of risk involved (ie; unsecured lending to small businesses with a high risk of default).
Unfortunately the majority of P2P investors don't understand the amount of risk involved, hence they invest in P2P over equities, when the reality is that global equities carry similar risk (if not less) and substantially higher returns (ie; 7-10% annually on average).
They are only really worthwhile if you need to hold large quantities of cash (or highly accessible savings), as a high rate taxpayer that has exceeded their annual interest free limit and ISA limit (doesn't apply to many people).
Pretty much everybody else would be better off putting their money elsewhere.