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.
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.