Side-by-side: Cash ISA vs Stocks & Shares ISA.
Cash ISA
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S&S ISA
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Your breakdown
Updates live as you type| Step | Cash ISA (4%) | Stocks and Shares ISA (7%) |
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Two tax-free wrappers, two very different risk profiles
Both halves of this comparison sit inside the same Individual Savings Account rules. Interest, dividends and capital growth are free of Income Tax and Capital Gains Tax, and nothing you earn inside the wrapper ever needs declaring on a Self Assessment return. The difference is what the money does once it is in there. A Cash ISA earns a fixed rate of interest and the balance never falls. A Stocks and Shares ISA buys funds or shares, so the value moves up and down with the market. This tool projects both forward at a rate you choose and shows the gap in plain pounds.
It is built for the saver who has settled the easy question, whether to use an ISA at all, and is now stuck on the harder one: cash certainty or equity growth. If your horizon is genuinely short, say a house deposit you need within four years, the answer usually leans cash because a 20 percent fall the year before completion is not recoverable. Over a decade or more the historical case for equities is strong, but it is never a guarantee, and this calculator is honest about that.
The same £20,000 allowance, split by goal
For 2025/26 the total ISA allowance is £20,000 across all your ISAs combined. You can put the whole lot in one Cash ISA, the whole lot in one Stocks and Shares ISA, or any mix. The contribution box here is capped at £20,000 for that reason. A common and sensible approach is to hold an emergency buffer in cash and direct the longer-term money to equities, so you are not forced to sell investments at a bad moment to cover a boiler repair.
One practical tip from years of watching people use these accounts: the rate you type into the Stocks and Shares box should be a return after fund charges, not a headline market figure. A global tracker quoting 7 percent gross is really closer to 6.8 percent in your hand once a 0.2 percent ongoing charge is taken. Small, but it compounds.
Twenty years of £10,000 a year, side by side
Take the tool's defaults: £10,000 paid in each year for 20 years, a Cash ISA at 4 percent and a Stocks and Shares ISA at 7 percent. The calculator treats each year's contribution as paid at the start of the year, so it grows for a full year before the next deposit lands. The future value of that stream is the annuity, multiplied by one more period of growth.
The equity route ends roughly £128,960 ahead on these assumptions. Every penny of that lead is tax-free because it grew inside the wrapper. Outside an ISA, a gain of that size would face Capital Gains Tax once it crossed the £3,000 annual exempt amount.
Where the gap actually comes from
It is not the headline rate alone, it is the rate compounding on an ever-larger base for two decades. In the first few years the two columns look almost identical. The gap widens sharply in the back half because by then the equity pot is large and a 7 percent return on a large number dwarfs 4 percent on a smaller one. This is also why shortening the horizon flatters cash and lengthening it flatters equities. The flip side, which the projection cannot show, is the path. Equities do not climb in a straight line, and you have to be able to leave the money alone through the dips for the average return to do its work.
Does the personal savings allowance change this?
Not inside an ISA, and that is the point. Outside an ISA, basic-rate taxpayers get £1,000 of savings interest tax-free and higher-rate taxpayers get £500, so for very small cash balances an ordinary savings account can be just as tax-efficient. The ISA wrapper earns its keep once your interest or gains grow beyond those allowances, which a serious long-term pot will.
Can I move money from a Cash ISA to a Stocks and Shares ISA later?
Yes. An ISA transfer moves the balance between providers or types without using up a fresh slice of your £20,000 allowance, provided you use the provider's transfer process rather than withdrawing the cash yourself. Withdrawing and re-depositing would count as a new contribution. Many people start cautious in cash and shift toward equities as their horizon lengthens, and a proper transfer keeps the tax shelter intact.