Both are ISAs, so both are tax-free. The difference is what’s inside: a cash ISA is a savings account, while a stocks and shares ISA holds investments whose value moves.
The comparison
| Cash ISA | Stocks and shares ISA | |
|---|---|---|
| What it holds | Savings with a bank, building society or NS&I | Shares, funds, bonds and other investments |
| Can it fall in value? | No | Yes: you can get back less than you paid in |
| Return | A stated interest rate, fixed or variable | Whatever the investments return, which isn’t known in advance |
| Protection | FSCS up to £120,000 per person, per bank | No cover for falls in value; FSCS cover up to £85,000 only if a firm fails with a shortfall |
| Costs | Built into the rate | Platform and fund charges, taken from the return |
| Allowance | Shares the £20,000 allowance (at most £12,000 for under-65s from 6 April 2027) | Shares the £20,000 allowance |
How long you’ll leave the money
The main question is when you’ll need the money:
- Within a few years, or for a cost you can’t put off (a house deposit next year, an emergency fund): cash. A fall in the stock market just before you need the money could leave you short.
- For longer, and you could ride out a fall without having to sell: a stocks and shares ISA gives you the chance of growth above cash rates. Over short periods investments can fall as well as rise, so the longer you can leave them, the more time they have to recover from a fall.
The average rates cash ISAs pay now are in cash ISA rates. For what a stocks and shares ISA might grow to, the ISA calculator lets you try different rates of growth; none is guaranteed.
Costs
A cash ISA’s rate is what you get. A stocks and shares ISA has costs that come out of the return: usually a platform or account charge, and the charges of the funds you hold. Compare the total, as a percentage and in pounds for your balance, before choosing a provider. See stocks and shares ISAs for how to choose investments.
Using both
You don’t have to choose one: you can keep money you may need in a cash ISA and longer-term money in a stocks and shares ISA, within the same allowance. Money can be moved between them later with an ISA transfer without using allowance.
The April 2027 changes
From 6 April 2027 the most people under 65 can put into cash ISAs is £12,000 a tax year, within the overall £20,000 ISA allowance; people aged 65 or over keep a £20,000 cash ISA limit.Transfers from stocks and shares ISAs and innovative finance ISAs into cash ISAs are restricted. Interest paid on cash held inside a stocks and shares or innovative finance ISA has a flat 22% charge. So from 2027/28, holding large cash balances inside a stocks and shares ISA as a way round the cash limit will cost you.
Related guides
- ISAs guide: the ISA types, the allowance and the main choices in one place
- Cash ISA rates: average rates now and what to check
- Stocks and shares ISAs: opening one and choosing investments
- ISA allowance: splitting the allowance between ISAs
- Innovative finance ISAs: lending through an ISA, and its risks