Comparison · 2025/26
Cash ISA vs Stocks & Shares ISA
The two most popular UK ISA types serve completely different goals. Cash ISA = certainty + instant access. Stocks & Shares ISA = long-term growth potential. Here\'s how to choose.
Side-by-Side
| Feature | Cash ISA | S&S ISA |
|---|---|---|
| Annual return (typical) | 4-5% AER (2025) | 5-10% avg long-term |
| Capital risk | None (FSCS £85k) | Yes — can fall |
| Best holding period | Any (short) | 5+ years |
| Tax inside wrapper | 0% | 0% |
| Fees | £0 (rate baked in) | 0.20-0.45% platform + fund fees |
| Allowance | £20,000/year (combined) | £20,000/year (combined) |
| Access | Easy-access or fixed term | Sell investments + transfer cash (days) |
Worked Example: £10,000 over 20 Years
- Cash ISA at 4.5%: £24,117
- S&S ISA at 7% (typical equity long-run): £38,697
- Difference: £14,580 more from S&S — but with volatility, S&S could fall 20-30% in any year
The «risk premium» (extra return for risk) is real but only realised over long periods. For money you might need in 1-5 years, Cash ISA almost always wins.
Decision Framework
Choose Cash ISA if:
- Money needed within 5 years
- Emergency fund / house deposit / wedding savings
- Risk-averse, want certainty
- You\'d worry about market falls
Choose S&S ISA if:
- Long-term goals (10+ years): retirement, child\'s university fund
- Can stomach 20-40% drops without panic-selling
- Already have an emergency fund elsewhere
- Want to outpace inflation
FAQs
Which ISA gives higher returns?
Historically Stocks & Shares ISAs outperform Cash ISAs over 10+ years. FTSE All-Share has averaged ~7% pa over 50 years, S&P 500 ~10%. Cash ISAs currently pay 4-5% (best rates). But S&S can fall in any year — only invest money you don't need for 5+ years.
Can I split my £20k between both?
Yes. The £20,000 annual ISA allowance can be split however you like across Cash, Stocks & Shares, Innovative Finance and Lifetime ISAs (max £4,000 LISA). From April 2024, you can also have multiple ISAs of the same type in one tax year.
Which is best for an emergency fund?
Cash ISA — you need certainty, instant access, and guaranteed FSCS protection up to £85,000. Stocks & Shares ISA is too volatile for emergency money.
Can I transfer between Cash and S&S ISA?
Yes — always use the new provider's ISA transfer form (don't withdraw and re-deposit, which resets your allowance). Cash → S&S takes 15 working days. S&S → S&S typically 4-6 weeks because investments must be sold and re-bought.
Calculators & Guides
Calculators for this topic
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Salary Sacrifice Calculator
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Disclaimer: Past investment performance is not a guarantee. The value of S&S ISA investments can fall. This is information, not advice.