# Cash ISA vs Stocks & Shares ISA — what's the difference? > Savings & ISAs · Last updated 6 April 2026 Canonical HTML: https://moneyguide.org.uk/savings/cash-isa-vs-stocks-and-shares-isa/ Markdown mirror: https://moneyguide.org.uk/savings/cash-isa-vs-stocks-and-shares-isa.md ## Quick answer Both are tax-free wrappers around the same £20,000 annual allowance, but they hold completely different kinds of asset. Both are tax-free wrappers around the same £20,000 annual allowance, but they hold completely different kinds of asset. A Cash ISA is a savings account where the interest is tax-free and the capital is FSCS-protected up to £85,000 per banking group. A Stocks & Shares ISA holds investments — usually funds, ETFs or shares — whose value can fall as well as rise. The right choice depends almost entirely on when you'll need the money. ## Key facts - Both use the same £20,000 annual ISA allowance. - Cash ISA: interest only, FSCS-protected up to £85,000 per bank group. - Stocks & Shares ISA: holds investments; value can fall as well as rise. - FSCS investment protection is up to £85,000 per authorised firm — for firm failure, not market losses. - Money can be transferred between Cash and Stocks & Shares ISAs at any time using the formal transfer process, with no impact on the allowance. - Time horizon test: cash for money needed within 5 years; investments for money you can leave for 10+ years. ## Cash ISA: how it works A Cash ISA is, in effect, a savings account where the interest is tax-free. The capital is FSCS-protected up to £85,000 per banking group, the same as a normal savings account. Easy-access, notice and fixed-rate Cash ISAs all exist. The fixed-rate accounts usually pay more but lock the money up for a year or longer; some allow access with an interest penalty. ## Stocks & Shares ISA: how it works A Stocks & Shares ISA holds investments — most commonly funds, ETFs and individual shares. Any capital gains and any dividends inside the ISA are tax-free. Returns are not guaranteed and the value can fall. Over rolling 10-year periods, a diversified global equity portfolio has historically delivered around 5% per year above inflation, but with significant volatility year-to-year. ## Which to choose A common framing: cash for money you might need within 5 years (emergency fund, house deposit, near-term commitments) and stocks & shares for money you can leave invested for at least 5–10 years. You can hold both. The £20,000 limit applies across all your ISAs combined, but how you split it between cash and investments is up to you. ## Costs and what eats your returns Cash ISAs are free to operate — you receive the headline rate quoted and that's it. Compare like-for-like using the gross AER; ignore introductory bonuses if you won't switch again when they expire. Stocks & Shares ISAs charge a platform fee (typically 0.15–0.45% a year, or a flat monthly fee of £10–£15) plus the ongoing charges figure (OCF) of the funds you hold (0.05–0.30% for global index trackers, 0.5–1.0% for active funds). Combined, a low-cost portfolio runs at around 0.30–0.50% a year, an actively-managed portfolio 1.0–1.5%. Over 20 years that 1% difference removes about a fifth of the eventual pot. ## Switching between them without losing your allowance An ISA-to-ISA transfer (cash to stocks, stocks to cash, or provider to provider) preserves the tax-free wrapper and does not use up any of the current year's allowance — provided you fill in the receiving provider's transfer form and let them request the move, rather than withdrawing the cash and re-paying it in yourself. Stocks & Shares ISAs can usually be transferred 'in specie' (keeping the investments) or 'as cash' (sold first, transferred, then re-bought). In specie avoids being out of the market but takes longer; cash is faster but you're out of the market for 1–4 weeks. Cash ISAs holding fixed-rate accounts may charge an interest penalty for transferring out before the term ends — check before initiating the move. ## Frequently asked questions ### Can I move money between a Cash ISA and a Stocks & Shares ISA? Yes. Use the formal ISA transfer process and the move does not affect your annual allowance. Withdrawing and re-paying would use up some or all of the current year's allowance. ### Are Stocks & Shares ISA gains really tax-free? Yes — no Income Tax on dividends or interest inside the ISA, and no Capital Gains Tax on profits when you sell. You do not need to report ISA gains to HMRC. ### What protection do I have? Cash ISA deposits are protected by the FSCS up to £85,000 per banking group. Stocks & Shares ISAs are protected up to £85,000 per authorised firm against the firm itself failing — investment losses caused by markets falling are not compensated. ### Can I pay into a Cash ISA and a Stocks & Shares ISA in the same tax year? Yes, and since April 2024 you can pay into more than one of each type as well — provided your combined new contributions across all adult ISAs stay within £20,000. ### If markets crash, do I lose my Stocks & Shares ISA allowance? No — the tax-free wrapper stays in place regardless of the pot's value. A £20,000 contribution that falls to £14,000 still sits inside an ISA and any future recovery is also tax-free. You don't get a top-up allowance to make up the loss, though. ## Primary source gov.uk/individual-savings-accounts ## Related - [Savings & ISAs guide](https://moneyguide.org.uk/savings/) - [Investing guide](https://moneyguide.org.uk/investing/) - [Savings goal calculator](https://moneyguide.org.uk/tools/savings-goal-calculator/) --- Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.