Erin Yurday
Author
Cash ISAs vs Stocks & Shares ISAs: how they compare
Every UK adult resident can put up to £20,000 into an ISA during the current 2026/27 tax year. The allowance can go into one account or be split across different types of ISA (GOV.UK).
At the Autumn Budget on 28 October 2026, the Government dropped a planned cut to the cash ISA limit for people under 65. It said the cash ISA limit stays at £20,000 for everyone, within the same £20,000 overall allowance (HM Treasury).
This article explains how cash ISAs and stocks and shares ISAs work, how they differ, and what the Budget confirmed. It is general information, not financial or tax advice.
What is an ISA?
An ISA (individual savings account) is an account you can save or invest in tax-free (GOV.UK). Money stays tax-free for as long as it remains in the ISA.
You can take money out of an ISA at any time, and you don’t pay tax on what you withdraw (GOV.UK). Once it’s out, though, it no longer grows tax-free. With most ISAs, paying money back in uses up more of that year’s allowance (see flexible ISAs below).
Some ISAs have their own withdrawal rules:
Lifetime ISAs: you can withdraw without a charge only to buy your first home (costing £450,000 or less, and other conditions apply), once you’re 60, or if you’re terminally ill with less than 12 months to live. Since 29 October 2026, withdrawals to buy a first home costing more than £450,000 carry a reduced 20% charge, if you otherwise meet the conditions. Any other withdrawal has a 25% government charge, which can leave you with less than you paid in. For example, if you paid in £800 and received a £200 government bonus, withdrawing the full £1,000 for another purpose would leave you with £750, ignoring any interest or investment growth (GOV.UK).
Fixed-rate cash ISAs: some charge an interest penalty for early withdrawal or don’t allow it (see below).
Stocks and shares ISAs: you can usually sell investments to withdraw money, but their value can fall, so you may get back less than you put in.
What is the annual ISA allowance?
The overall ISA allowance for the 2026/27 tax year is £20,000. This covers every type of ISA you pay into during the tax year, including cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs. You can pay up to £4,000 a year into a Lifetime ISA, and this counts towards the £20,000 (GOV.UK).
Allowance you don’t use in a tax year can’t be carried forward to the next one.
Flexible ISAs: if an ISA is flexible (which most are not), you can take cash out and put it back in during the same tax year without reducing that year’s allowance. With an ISA that isn’t flexible, money you put back counts as a new payment (GOV.UK). Check the account terms to see whether an ISA is flexible.
What the Autumn Budget 2026 confirmed
A planned cut to the cash ISA limit for people under 65, announced at Budget 2025 for April 2027, has been dropped. The Government said the cash ISA limit stays at £20,000 for everyone, and the overall ISA allowance also stays at £20,000.
Sources: HM Treasury, Budget 2026 press release (28 October 2026); HMRC, Budget 2026 Overview of tax legislation and rates, Annex A. ISA rules can change again, so check GOV.UK for the latest position.
Cash ISAs and Stocks & Shares ISAs work very differently. To discover how, here's a closer look.
Cash ISAs
A cash ISA is a savings account that pays tax-free interest. There are two main types:
Easy-access cash ISAs let you pay in and withdraw money when you want. The interest rate is variable, so it can change at any time.
Fixed-rate cash ISAs pay a fixed rate for a set term. Early-access terms vary by provider: some charge an interest penalty for early withdrawal, and some don’t allow partial withdrawals. Check the terms before you pay in.
Cash ISAs are covered by the Financial Services Compensation Scheme (FSCS). Deposits are protected up to £120,000 per person, per authorised bank, building society or credit union. Brands that share a banking licence share one limit (FSCS).
How cash ISA rates have moved: Bank of England data for UK two-year fixed-rate cash ISAs (series IUMZID2, including unconditional bonuses) shows the average rate at 5.39% in September 2023. It then went up and down, reaching 3.67% in December 2024 and again in February 2026, and was 4.6% in October 2026. These figures are market averages. Rates offered by individual providers vary by account type and term, and can change at any time.
On 5 November 2026, the Bank of England raised the Bank Rate to 4%.
Date | Average 2-year fixed cash ISA rate |
31 Oct 26 | 4.6% |
30 Sep 26 | 4.54% |
31 Aug 26 | 4.4% |
31 Jul 26 | 4.34% |
30 Jun 26 | 4.37% |
31 May 26 | 4.40% |
30 Apr 26 | 4.28% |
31 Mar 26 | 3.80% |
28 Feb 26 | 3.67% |
31 Jan 26 | 3.70% |
31 Dec 25 | 3.72% |
30 Nov 25 | 3.82% |
31 Oct 25 | 3.82% |
30 Sep 25 | 3.79% |
31 Aug 25 | 3.82% |
31 Jul 25 | 3.82% |
30 Jun 25 | 3.80% |
31 May 25 | 3.82% |
30 Apr 25 | 4.02% |
31 Mar 25 | 3.97% |
28 Feb 25 | 3.80% |
31 Jan 25 | 3.73% |
Source: Bank of England database, series IUMZID2, monthly data to October 2026, checked 11 November 2026.
Savings interest outside an ISA: interest on savings outside an ISA can also be tax-free up to your Personal Savings Allowance. That is £1,000 a year for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. If your other taxable income is under £17,570, you may also get the starting rate for savings of up to £5,000 (GOV.UK). From 6 April 2027, tax rates on savings income above these allowances are set to rise to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers (from 20%, 40% and 45%), across the UK (HMRC). Interest inside an ISA stays tax-free.
Stocks and shares ISAs
A stocks and shares ISA lets you invest (for example in shares, funds or bonds) without paying tax on the returns inside the account.
Investing carries risk. The value of investments can fall as well as rise, and you may get back less than you put in. Past performance is not a guide to future returns.
Cash in a cash ISA doesn't carry this risk to your capital, although inflation can reduce what your savings will buy over time.
You can pay into a cash ISA and a stocks and shares ISA in the same tax year, as long as your total payments across all your ISAs stay within the £20,000 allowance.
Many providers offer stocks and shares ISAs, and their charges, investment choices and minimum amounts vary. This article doesn't cover the whole market.
Returns: a fixed-rate cash ISA pays a set rate for its term. An easy-access cash ISA pays a variable rate. Returns from a stocks and shares ISA depend on how the investments perform and aren't guaranteed.
Risk to capital: cash ISA deposits are protected by the FSCS up to £120,000 per person, per authorised firm. Investments in a stocks and shares ISA can lose value.
Access: easy-access cash ISAs allow withdrawals at any time. Fixed-rate cash ISAs may restrict or charge for early access. Investments can usually be sold, but you may get back less than you put in.
Inflation:
UK inflation was 3.5% in the 12 months to September 2026, up from 3.1% in August, as measured by the Consumer Prices Index (CPI). Transport costs, particularly motor fuels, made the largest upward contribution to the change. That is well below the 11.1% peak seen in October 2022, but above the Bank of England’s 2% target. In November 2026, the Bank said it expects CPI inflation to reach around 5% by the middle of 2027.
The ONS’s CPIH measure, which includes owner occupiers’ housing costs, was 3.6% in the same period.
Which type of ISA is suitable depends on your own circumstances. This article is not financial advice. If you're unsure, you can get help from a regulated financial adviser.
ISA tax treatment depends on your individual circumstances and may change in future. This article is not tax advice.
Erin Yurday
Author
Meet the author
Author
Erin Yurday
Erin was the founder of NimbleFins, a data driven personal finance site. A former derivatives trader and finance expert at the Stanford Graduate School, Erin turns research into plain answers so you can understand your credit.
Cash ISAs vs Stocks & Shares ISAs: how they compare
Erin Yurday
Author
Every UK adult resident can put up to £20,000 into an ISA during the current 2026/27 tax year. The allowance can go into one account or be split across different types of ISA (GOV.UK).
At the Autumn Budget on 28 October 2026, the Government dropped a planned cut to the cash ISA limit for people under 65. It said the cash ISA limit stays at £20,000 for everyone, within the same £20,000 overall allowance (HM Treasury).
This article explains how cash ISAs and stocks and shares ISAs work, how they differ, and what the Budget confirmed. It is general information, not financial or tax advice.
What is an ISA?
An ISA (individual savings account) is an account you can save or invest in tax-free (GOV.UK). Money stays tax-free for as long as it remains in the ISA.
You can take money out of an ISA at any time, and you don’t pay tax on what you withdraw (GOV.UK). Once it’s out, though, it no longer grows tax-free. With most ISAs, paying money back in uses up more of that year’s allowance (see flexible ISAs below).
Some ISAs have their own withdrawal rules:
Lifetime ISAs: you can withdraw without a charge only to buy your first home (costing £450,000 or less, and other conditions apply), once you’re 60, or if you’re terminally ill with less than 12 months to live. Since 29 October 2026, withdrawals to buy a first home costing more than £450,000 carry a reduced 20% charge, if you otherwise meet the conditions. Any other withdrawal has a 25% government charge, which can leave you with less than you paid in. For example, if you paid in £800 and received a £200 government bonus, withdrawing the full £1,000 for another purpose would leave you with £750, ignoring any interest or investment growth (GOV.UK).
Fixed-rate cash ISAs: some charge an interest penalty for early withdrawal or don’t allow it (see below).
Stocks and shares ISAs: you can usually sell investments to withdraw money, but their value can fall, so you may get back less than you put in.
What is the annual ISA allowance?
The overall ISA allowance for the 2026/27 tax year is £20,000. This covers every type of ISA you pay into during the tax year, including cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs. You can pay up to £4,000 a year into a Lifetime ISA, and this counts towards the £20,000 (GOV.UK).
Allowance you don’t use in a tax year can’t be carried forward to the next one.
Flexible ISAs: if an ISA is flexible (which most are not), you can take cash out and put it back in during the same tax year without reducing that year’s allowance. With an ISA that isn’t flexible, money you put back counts as a new payment (GOV.UK). Check the account terms to see whether an ISA is flexible.
What the Autumn Budget 2026 confirmed
A planned cut to the cash ISA limit for people under 65, announced at Budget 2025 for April 2027, has been dropped. The Government said the cash ISA limit stays at £20,000 for everyone, and the overall ISA allowance also stays at £20,000.
Sources: HM Treasury, Budget 2026 press release (28 October 2026); HMRC, Budget 2026 Overview of tax legislation and rates, Annex A. ISA rules can change again, so check GOV.UK for the latest position.
Cash ISAs and Stocks & Shares ISAs work very differently. To discover how, here's a closer look.
Cash ISAs
A cash ISA is a savings account that pays tax-free interest. There are two main types:
Easy-access cash ISAs let you pay in and withdraw money when you want. The interest rate is variable, so it can change at any time.
Fixed-rate cash ISAs pay a fixed rate for a set term. Early-access terms vary by provider: some charge an interest penalty for early withdrawal, and some don’t allow partial withdrawals. Check the terms before you pay in.
Cash ISAs are covered by the Financial Services Compensation Scheme (FSCS). Deposits are protected up to £120,000 per person, per authorised bank, building society or credit union. Brands that share a banking licence share one limit (FSCS).
How cash ISA rates have moved: Bank of England data for UK two-year fixed-rate cash ISAs (series IUMZID2, including unconditional bonuses) shows the average rate at 5.39% in September 2023. It then went up and down, reaching 3.67% in December 2024 and again in February 2026, and was 4.6% in October 2026. These figures are market averages. Rates offered by individual providers vary by account type and term, and can change at any time.
On 5 November 2026, the Bank of England raised the Bank Rate to 4%.
Date | Average 2-year fixed cash ISA rate |
31 Oct 26 | 4.6% |
30 Sep 26 | 4.54% |
31 Aug 26 | 4.4% |
31 Jul 26 | 4.34% |
30 Jun 26 | 4.37% |
31 May 26 | 4.40% |
30 Apr 26 | 4.28% |
31 Mar 26 | 3.80% |
28 Feb 26 | 3.67% |
31 Jan 26 | 3.70% |
31 Dec 25 | 3.72% |
30 Nov 25 | 3.82% |
31 Oct 25 | 3.82% |
30 Sep 25 | 3.79% |
31 Aug 25 | 3.82% |
31 Jul 25 | 3.82% |
30 Jun 25 | 3.80% |
31 May 25 | 3.82% |
30 Apr 25 | 4.02% |
31 Mar 25 | 3.97% |
28 Feb 25 | 3.80% |
31 Jan 25 | 3.73% |
Source: Bank of England database, series IUMZID2, monthly data to October 2026, checked 11 November 2026.
Savings interest outside an ISA: interest on savings outside an ISA can also be tax-free up to your Personal Savings Allowance. That is £1,000 a year for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. If your other taxable income is under £17,570, you may also get the starting rate for savings of up to £5,000 (GOV.UK). From 6 April 2027, tax rates on savings income above these allowances are set to rise to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers (from 20%, 40% and 45%), across the UK (HMRC). Interest inside an ISA stays tax-free.
Stocks and shares ISAs
A stocks and shares ISA lets you invest (for example in shares, funds or bonds) without paying tax on the returns inside the account.
Investing carries risk. The value of investments can fall as well as rise, and you may get back less than you put in. Past performance is not a guide to future returns.
Cash in a cash ISA doesn't carry this risk to your capital, although inflation can reduce what your savings will buy over time.
You can pay into a cash ISA and a stocks and shares ISA in the same tax year, as long as your total payments across all your ISAs stay within the £20,000 allowance.
Many providers offer stocks and shares ISAs, and their charges, investment choices and minimum amounts vary. This article doesn't cover the whole market.
Returns: a fixed-rate cash ISA pays a set rate for its term. An easy-access cash ISA pays a variable rate. Returns from a stocks and shares ISA depend on how the investments perform and aren't guaranteed.
Risk to capital: cash ISA deposits are protected by the FSCS up to £120,000 per person, per authorised firm. Investments in a stocks and shares ISA can lose value.
Access: easy-access cash ISAs allow withdrawals at any time. Fixed-rate cash ISAs may restrict or charge for early access. Investments can usually be sold, but you may get back less than you put in.
Inflation:
UK inflation was 3.5% in the 12 months to September 2026, up from 3.1% in August, as measured by the Consumer Prices Index (CPI). Transport costs, particularly motor fuels, made the largest upward contribution to the change. That is well below the 11.1% peak seen in October 2022, but above the Bank of England’s 2% target. In November 2026, the Bank said it expects CPI inflation to reach around 5% by the middle of 2027.
The ONS’s CPIH measure, which includes owner occupiers’ housing costs, was 3.6% in the same period.
Which type of ISA is suitable depends on your own circumstances. This article is not financial advice. If you're unsure, you can get help from a regulated financial adviser.
ISA tax treatment depends on your individual circumstances and may change in future. This article is not tax advice.
Erin Yurday
Author
Meet the author
Author
Erin Yurday
Erin was the founder of NimbleFins, a data driven personal finance site. A former derivatives trader and finance expert at the Stanford Graduate School, Erin turns research into plain answers so you can understand your credit.