Autonomous Structural Health Monitoring (SHM) has been introduced in composite structures extensively over the last decade in an attempt to proactively monitor potential internal defects, however active/passive control of their integrity status still remains a challenge. In this work, a novel, non-Newtonian multifunctional polymer with unique active/passive capabilities is proposed for impact protection and SHM of composite laminate structures. This Polyborosiloxane(PBS)-based polymer with unique shear-dependant energy absorption characteristics, owed to a phase transition occurrence within its polymeric network, was utilised as scaffold for ferromagnetic iron particles which enabled the manufacturing of the multifunctional matrix for Glass Fibres Reinforced Polymer (GFRP). The iron particles were positioned in the polymer matrix, which was reinforced with glass fibres and employed as outer ply of a laminate structure. Their presence enables a dual functionality of the multifunctional layer: firstly, in the presence of a magnetic field, triggers the phase transition of the polymeric network offering protection to the laminate in case of impacts, and secondly, post-impact allows for the assessment of the internal integrity of the component, acting as an embedded heat source for active Infrared (IR) Thermography. The ability of the iron particles to initiate the phase transition was investigated by means of Low Velocity Impact in the presence/absence of a magnetic field and the laminates were then examined by means of induction thermography, for the evaluation of the internal damage. Results revealed that iron particles in the presence of a magnetic field led to an enhanced protection of the composite laminates, significantly reducing the extent of the internal damage. This novel, low-cost multifunctional layer provides a unique solution for the protection of composite materials, addressing their inherent weak resistance in out-of-plane direction and providing affordable SHM, thus opening new perspectives for smart structural materials which are in great demand in engineering sectors.