CoverMapKey takeaway: A cash ISA suits money you might need soon or can't afford to see fall in value. A stocks & shares ISA suits money you can leave invested for 5+ years, in exchange for higher long-term growth potential and real capital risk.
Cash ISA
Works like a savings account — your capital doesn't fluctuate, and you earn a fixed or variable interest rate, entirely tax-free. Best suited to short-to-medium-term savings goals or an emergency fund.
Stocks & Shares ISA
Your money is invested in funds, shares or bonds inside the tax-free wrapper. Values can go down as well as up, but historically, investing over long periods (5+ years) has outperformed cash savings after inflation. Suited to longer-term goals like retirement top-ups.
Can you have both?
Yes — you can split your £20,000 annual allowance across both a cash ISA and a stocks & shares ISA in the same tax year, in whatever proportion suits your goals.