Reviewed for the 2026/27 UK tax year. See our editorial policy.
Picking between a Cash ISA and a Stocks & Shares ISA is the second most-asked question in UK personal finance. (The first is "how do I get out of my overdraft.") The answer isn't ideological — it's mechanical, driven by one variable: how long the money is going to stay there.
Cash ISA. Works exactly like a savings account. You earn interest, the rate is published in advance (usually fixed for fixed-rate, variable for easy-access), the balance only goes up. FSCS protects up to £120,000 per provider. Annual ISA allowance shared with other ISA types (£20,000 in 2026/27).
Stocks & Shares ISA. A wrapper around investments — funds, shares, bonds, ETFs. The value moves up and down with markets. Long-run returns historically beat cash, but only if you can hold through the bad years without selling. Same £20,000 annual allowance, no FSCS protection on capital losses (though FSCS does protect against fraud or platform failure).
Long-run UK data is striking. From 1900 to 2025, UK equities returned about 4.7% real (after inflation) per year, on average. Cash returned 0.7% real. Compounded over 30 years, £20,000 in equities turns into £80,000 in today's money; £20,000 in cash turns into £25,000. That gap is the entire reason we talk about Stocks & Shares ISAs at all.
But — and it's a big but — the equity number includes some genuinely terrible decades. The years 2000–2010 (the "lost decade") delivered close to 0% real for UK equities. Anyone who needed the money in 2009 took a 40% paper loss into reality.
Pick based on when you need the money:
Notice what's missing: nothing about your risk tolerance, your age, or how the markets feel right now. Time horizon is doing 90% of the work.
Equity returns over short periods are essentially random — even mildly negative on average after one year, because of bid-offer spreads and platform fees. Over 5 years, the probability of beating cash crosses 70%. Over 10 years, around 85%. Over 20 years, the probability is so high that the rare exceptions are macro-historical anomalies (post-WWI, the 1970s).
The £20,000 ISA allowance can be split across both wrappers in any way you like. Most people end up using both for different goals:
You don't need to choose one wrapper for life. You can pay into both this year and next year, with the same provider or different ones, in whatever proportion makes sense.
The split described above is fully flexible in the 2026/27 tax year. From 6 April 2027 three rules change for savers aged under 65 (HMRC tax-free savings newsletter 23, September 2026; ISA (Amendment) (No. 2) Regulations 2026):
Worked example. Amira is 34 and wants to shelter £20,000 in 2027/28. Under the old rules she could put all of it in a Cash ISA. From April 2027 she can put at most £12,000 in cash; the other £8,000 can go into a Stocks & Shares ISA, a Lifetime ISA (up to £4,000) or stay in an ordinary savings account, where interest is taxable above her Personal Savings Allowance. Her father, who is 67, can still put the full £20,000 in cash.
What it means for the decision on this page: if you are under 65 and want your full allowance in cash, 2026/27 (ending 5 April 2027) is the last tax year you can do that. Cash already inside a Cash ISA is not affected. The cap only limits new subscriptions.
Cash ISA costs: nothing. The advertised rate is what you get.
Stocks & Shares ISA costs: platform fee (typically 0.15–0.45% of assets) plus fund fees (0.05–0.5% for index funds, 0.5–1.5% for active). Total cost should usually be under 0.5%/year all-in. Above 1%, you're paying enough to wipe out the long-run advantage over cash.
Add your platform fee and your fund's OCF to get your all-in cost, and compare it with other platforms for the same fund. If yours is much higher, ask why.
If you've never lived through a -30% portfolio year, you don't know how you'll react. The standard advice "just don't sell" is correct and easier said than done. Two things help:
Want to see how splitting your £20k between wrappers plays out? Try the ISA allowance tracker. To compare the two wrappers on your own time horizon, use the invest vs save calculator (cash rate vs an assumed investment return) or the Cash ISA calculator for the cash side on its own.
Yes, via an "ISA transfer." Crucially, do not withdraw and redeposit — that uses up your annual allowance again. Ask your new provider to handle it; they'll fetch the money from the old one without breaking the wrapper.
Fix the rate when you're confident you won't need access. The penalty for early withdrawal is typically 60–180 days' interest. Easy-access is more flexible at a slightly lower rate.
It depends on whether you choose accumulation (Acc) or income (Inc) units. Accumulation reinvests automatically inside the wrapper; income pays out cash you can either withdraw or reinvest yourself. Acc is simpler for most savers.
Most UK platforms accept £25–£100 minimums for monthly direct debits, or £500 for a lump sum. There's no legal minimum to keep one open. For ranked platform picks, see our Best Stocks & Shares ISAs UK 2026/27 comparison.
This article is general information about UK personal finance. It is not regulated financial advice and Pennywise Finance is not authorised by the Financial Conduct Authority. For decisions involving large sums or complex situations, please consult an FCA-authorised adviser.