Cash ISA vs Stocks & Shares ISA — which UK ISA is right for you?
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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.
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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.
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Side by side
What it holds
Cash ISA
Cash deposits
Stocks & Shares ISA
Funds, shares, ETFs, investment trusts, bonds
Typical use
Cash ISA
Emergency fund, short-term savings
Stocks & Shares ISA
Long-term investing (5+ years)
Capital risk
Cash ISA
None — capital protected
Stocks & Shares ISA
Capital can fall as well as rise
Headline return type
Cash ISA
Interest (fixed or variable)
Stocks & Shares ISA
Capital growth + dividends
FSCS cover
Cash ISA
£85,000 per banking licence
Stocks & Shares ISA
£85,000 per platform for cash held; investment loss not covered
Annual ISA allowance
Cash ISA
£20,000 (shared)
Stocks & Shares ISA
£20,000 (shared)
Tax on growth/interest
Cash ISA
None inside the wrapper
Stocks & Shares ISA
None inside the wrapper
Typical charges
Cash ISA
None
Stocks & Shares ISA
Platform fee + fund OCF (often 0.2–1.0% combined)
Access
Cash ISA
Easy-access or fixed-term
Stocks & Shares ISA
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
Related quick answers
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.