Compare · Cash ISA vs Stocks & Shares ISA
Cash ISA vs Stocks & Shares ISA — which UK ISA is right for you?
In short. A Cash ISA holds cash and pays interest tax-free. A Stocks & Shares ISA holds investments — returns can be higher over the long run but the value can fall as well as rise.
Both are wrappers that protect your money from UK Income Tax, Dividend Tax and Capital Gains Tax. The £20,000 annual ISA allowance is shared across all types you hold. The right choice depends almost entirely on your time horizon and your tolerance for short-term loss.
Last reviewed:
Side by side
| Criterion | Cash ISA | Stocks & Shares ISA |
|---|---|---|
| What it holds | Cash deposits | Funds, shares, ETFs, investment trusts, bonds |
| Typical use | Emergency fund, short-term savings | Long-term investing (5+ years) |
| Capital risk | None — capital protected | Capital can fall as well as rise |
| Headline return type | Interest (fixed or variable) | Capital growth + dividends |
| FSCS cover | £85,000 per banking licence | £85,000 per platform for cash held; investment loss not covered |
| Annual ISA allowance | £20,000 (shared) | £20,000 (shared) |
| Tax on growth/interest | None inside the wrapper | None inside the wrapper |
| Typical charges | None | Platform fee + fund OCF (often 0.2–1.0% combined) |
| Access | Easy-access or fixed-term | Sell investments to access — usually 2–3 working days |
When Cash ISA usually wins
- You will need the money inside five years
- You want certainty of capital
- You are using it as an emergency fund
- You have already filled your Personal Savings Allowance and want to keep interest tax-free
When Stocks & Shares ISA usually wins
- You won't need the money for at least five years (ideally longer)
- You can stomach the value falling in the short term
- You want a realistic chance of beating inflation
- You're investing for retirement, a child's future or a long-term goal
FAQ
- Can I have both a Cash ISA and a Stocks & Shares ISA in the same tax year?
- Yes. Since 6 April 2024 you can pay into more than one ISA of the same type in the same tax year, and you can split your £20,000 allowance across both a Cash ISA and a Stocks & Shares ISA in any proportion.
- Is a Stocks & Shares ISA risky?
- The wrapper itself is not risky. The risk depends on what you hold inside it. A global index fund is lower risk than a single share. The value can fall as well as rise, so it is not suitable for money you will need soon.
- Which gives better returns over 10 years?
- Historically a diversified Stocks & Shares ISA has outperformed cash over rolling 10-year periods, but there is no guarantee. Past performance is not a guide to future returns.
- What happens to my ISA if the bank or platform fails?
- Cash up to £85,000 is protected by the Financial Services Compensation Scheme per banking licence (Cash ISA) or per investment firm (cash sitting in a Stocks & Shares ISA). Investment losses caused by market falls are not covered.