Cash ISA vs Stocks and Shares ISA: Which Should Your Money Be In?
Both share the same £20,000 wrapper. The contents change what the wrapper is worth in pounds you can actually spend.
Your cash ISA balance is the same as it was a year ago. You were paid interest. The statement is right. The statement is also misleading.
The interest was added. The number went up. The cost of the things you would buy with that number also went up. Over long periods, the gap between the two is the difference between saving and quietly losing. This page walks through the maths on both wrappers and shows how to split the £20,000 allowance between them.
You opened a cash ISA last year because someone told you ISAs are the right place for savings. They were not wrong. The wrapper is right. The question is what you put inside it. Many people who opened a cash ISA a decade ago and never moved the money are now sitting on a balance that buys less than it did when they put it there.
That is not a reason to panic. It is a reason to look at what the wrapper is for, decide which chunk of your £20,000 allowance belongs in each one, and move the chunk that does not belong there.
The wrapper is the same. The contents change the answer.
Both a cash ISA and a stocks and shares ISA share the same £20,000 annual allowance. Both grow without you paying income tax or capital gains tax on what they earn. Both are run by FCA-regulated providers. The full explainer on how the wrapper works is on the how ISAs work page.
The difference between them is what you hold inside the wrapper. A cash ISA holds pounds earning interest. A stocks and shares ISA holds investments (most commonly funds, ETFs or shares) that can rise and fall in value. The £20,000 allowance does not have to go into one or the other. It can be split.
| What you are choosing between | Cash ISA | Stocks and shares ISA |
|---|---|---|
| What is inside the wrapper | Cash earning interest | Investments (funds, ETFs, shares) |
| Tax treatment | No tax on interest | No tax on dividends or gains |
| Typical current return (28 July 2026) | 5.00% top easy-access (Revolut new customers, until 4 Dec 2026) | Variable, long-run average around 5% to 7% nominal |
| Risk to your balance | None in nominal pounds. Real-terms growth at top rates as of 28 July 2026 (5.00% Revolut vs 2.6% CPI = +2.4 percentage points); real-terms loss at standard variable rates. | Yes, the balance will move up and down |
| Best suited for | Money you will spend within five years | Money you will not touch for ten years plus |
Rates and returns shown are illustrative for 28 July 2026. Cash ISA rates from Moneyfacts easy-access tables (5.00% top easy-access, 4.90% top 1y fixed). CPI 2.6% from the most recent ONS print. Stocks and shares long-run average is the historical real return on a global equity index fund, before platform and fund charges. Your actual return will be different.
The cash ISA in plain numbers
The best easy-access cash ISA rate on 28 July 2026 is 5.00% (Revolut new customers, until 4 December 2026; Chase 4.50% boosted for 12 months). The UK CPI rate is 2.6% on the most recent ONS print, and the UK CPI inflation rate has averaged around 3.4% over the past ten years. Top cash now beats CPI by around 2.4 percentage points in real terms, the first sustained period since 2008 to 2009 where top cash has beaten inflation. The longer-run arithmetic still adds up over the kind of periods cash ISAs are usually held for, which is why the stocks and shares ISA remains the right home for money that will not be touched for ten years plus. Source: Moneyfacts, ONS.
£20,000 over 10 years in cash
At 4.5% interest, no further contributions, the balance grows to around £31,000 in nominal pounds.
After 3.4% inflation each year, those pounds buy what around £22,500 bought in 2026. You are ahead in nominal terms and behind in real terms.
£20,000 over 10 years in a global index fund
At a 5% real annual return after inflation and charges, the same £20,000 grows to around £33,000 in today's money.
The balance will be higher or lower than £20,000 in some years. The ten-year figure smooths the path.
The point of those two numbers is not that one is dramatically better than the other. The point is that the cash ISA figure shrinks in real terms and the stocks and shares ISA figure grows in real terms, and the gap between them is roughly the cost of leaving long-horizon money in the wrong wrapper.
When each wrapper is the right one
Most people do not need to pick one wrapper for everything. The right answer for almost everyone is to hold both, and to decide which chunk of the £20,000 allowance belongs in which wrapper based on when the money will be spent.
Cash ISA is the right wrapper for:
- Your emergency fund (three to six months of essential spending, accessible without penalty)
- A house deposit you will use within three years
- Money earmarked for a specific bill in the next twelve months (tax bill, school fees, planned purchase)
- Money you cannot afford to watch drop 20% in a bad quarter
The April 2027 change worth knowing about
Following the 2025 Autumn Budget, the amount you can put into a cash ISA will be capped at £12,000 a year if you are under 65, starting from April 2027. The overall £20,000 ISA allowance is unchanged. The remaining £8,000 of the allowance will still be available for non-cash ISAs (a stocks and shares ISA, a Lifetime ISA, an Innovative Finance ISA).
The government's stated reason is to nudge long-term savings towards investment rather than cash. Whatever the reason, the practical effect is that the under-65 reader who wants to put £20,000 a year into cash cannot, from April 2027. The cash ISA window narrows. The stocks and shares ISA window does not. The split you put in place this month will still be a valid split in eight months' time, and the longer-horizon chunks that move out of cash and into investments now are the chunks the new rule will force into investments anyway.
How to split the £20,000 allowance this month
The split below is illustrative, not advice. It is the kind of split that works for a 38 year old with a workplace pension already paying the employer match, a three-month emergency fund in cash, and no house purchase planned in the next three years.
- £5,000 in a cash ISA. The chunk you might need for an unexpected bill or to top up the emergency fund. Easy access, no risk to the balance in nominal terms.
- £15,000 into a stocks and shares ISA. The chunk that is meant to still be working for you in 2036. A global index fund inside the wrapper, low platform charges, set up once and left alone.
- Spread over twelve months if it is easier. £1,667 a month into the stocks and shares ISA and £417 a month into the cash ISA uses the full £20,000 by 5 April 2027 and removes the lump-sum decision from the middle of the year.
The reader who is 55 with a house purchase planned in eighteen months would do the opposite. Most of the £20,000 belongs in a cash ISA. The remainder sits in a stocks and shares ISA only if there is money that genuinely will not be needed for ten years plus. The split is driven by horizon, not by the wrapper that sounds safer.
If you have £20,000 sitting in cash and still cannot tell which chunk belongs where, the cash vs investment calculator shows where your £20k should go across five, ten and twenty years using the 28 July 2026 rate snapshot. Run your numbers before the end of this month.
What to do this month
The comparison only matters if it changes what you do with the £20,000 ISA allowance that opened on 6 April 2026 and closes on 5 April 2027. One action this month, ordered by how much it moves the dial.
One action before 9 August
- Look at the cash you currently hold across current accounts, savings accounts and any existing ISA. Write down the chunk of it that is meant to still be working for you in 2036 and beyond. That is the chunk that does not belong in cash.
- Decide whether to move a lump or set up a monthly standing order. Both work. The lump removes the decision from your diary. The monthly standing order removes the lump-sum decision from the middle of the year.
- Move the chunk into a stocks and shares ISA held with an FCA-regulated provider. A global index fund is the default most readers in this situation choose, because it does not require picking individual companies. The choice of fund is not the important decision. The decision to move the chunk is.
For the wider picture of how ISAs fit alongside pensions, savings and the State Pension forecast, see the ISA vs SIPP order of operations page. For the reset-month tactical view of what to do with the £20,000 allowance three months into the tax year, see the ISA allowance reset month page. For the full explainer on how the wrapper itself works, see the how ISAs work page.
For the broader picture of whether your whole financial position is on track, see am I on track financially and the average UK savings by age benchmarks.
Related reading
- How does a tax-free ISA actually work? - the five-minute explainer on the wrapper, the allowance, and the four common mistakes.
- ISA allowance reset month: what to do in August - the tactical view of what to do with the £20,000 allowance three months into the new tax year.
- The ISA allowance just reset - the May reset-moment post explaining what the allowance is and what to do with it.
- Where should my £20k go? Cash vs investment calculator - compare five, ten and twenty-year outcomes at the 28 July 2026 rate snapshot.