Cash ISA vs stocks & shares ISA
Compare cash and stocks and shares ISAs to choose the right home for your savings.
The short answer
Neither type is universally better. It mostly comes down to when you need the money and how comfortable you are with risk. Cash ISAs suit short-term savings. Stocks & shares ISAs suit longer-term goals where you can afford to wait out market bumps.
How each works
A cash ISA is essentially a savings account with tax-free interest. As of July 2026, top easy-access rates are around 4.4-4.5%, though the best rates usually include a 12-month bonus that drops later.
A stocks & shares ISA holds investments such as funds or individual shares. Growth and dividends are tax-free inside the wrapper. Global stock markets have averaged roughly 7% a year over long periods, but returns are not guaranteed and values can fall as well as rise.
Time horizon is the deciding factor
Money you need within about 5 years suits cash. There is no risk of a badly timed market dip wiping out part of your deposit right before you need it.
Money you will not touch for 5-10+ years has historically done better invested, because there is time to recover from downturns. Past performance does not guarantee future returns, but the pattern over decades is clear.
Protection if things go wrong
Cash ISAs with UK-authorised banks are FSCS-protected up to £120,000 per person per firm (raised from £85,000 in December 2025). If the bank fails, you get your money back up to that limit.
Stocks & shares ISAs have FSCS cover up to £85,000 if the platform (the company holding your account) fails. Market losses are never covered. If your investments fall in value, that is on you.
Tax perspective
Outside an ISA, basic-rate taxpayers get a £1,000 Personal Savings Allowance on interest (£500 for higher rate, £0 for additional rate).
Investment gains outside an ISA face capital gains tax at 18% or 24% above the £3,000 annual exempt amount.
ISAs shelter everything from these taxes. That matters more the bigger your pot grows over time.
From April 2027 you may need both
If you are under 65, you will only be able to put £12,000 of your £20,000 allowance into cash from 6 April 2027. To use the full allowance, the remainder would need to go into another ISA type, most likely stocks & shares. Read our cash ISA changes from April 2027 guide for the full picture.
Try the numbers
Head to our ISA comparison page to see current rates and use the projection tool there. You can compare cash and investment outcomes side by side with your own figures.
Related guides
This is general information, not financial advice. Check GOV.UK for official details that apply to your situation.