Seeking a nicer ISA? Stocks & Shares ISAs Explained

11 February 2025

We are often surprised to hear people do not know there are multiple types of ISAs available, as they offer different ways to grow your savings. Understanding these differences is key to making the most of your tax-free allowances and as a result, your money.

There are two main types of Individual Savings Accounts (ISAs) available in the UK today: Cash and Stocks and Shares. UK taxpayers can contribute a total of £20,000 into one or either of these ISAs for the 2024/2025 tax year (running 6 April 2024 to 5 April 2025) and pay no Income or Capital Gains Tax on what they hold in their account/s.

Both types allow you to grow savings faster by using your tax-free allowances, but there are significant differences which will impact how much you could be saving over the long term.

In this blog post, we highlight three key differences between Stocks and Shares and Cash ISAs.

William Stevens

Partner, Head of Financial Planning

Capital at risk.

Please be aware that the value of your investments may fall as well as rise. The content of this blog post reflects our current understanding of UK legislation and only impacts those within the UK tax system. Tax treatment depends on personal circumstances, and the rules may be subject to future change.

1. Flexibility for the type of assets you can hold

The main difference between ISAs is the type of assets you can hold within them. For example, a Cash ISA allows you to contribute cash to bank and building society accounts. By comparison, a Stocks and Shares ISA enables you to make contributions into your account that you can hold in cash or invest in assets like shares, funds, bonds and gilts (or government bonds).

2. The potential to grow savings faster

ISAs shelter the assets held in the account from income, capital gains and dividend taxes, which offers a helpful boost for savers contributing to a Cash ISA. However, this feature can be even more beneficial for savers with a Stocks and Shares ISA due to the potential to grow savings further through investing their contributions. Investments can also benefit from compounding, which refers to how the interest earned on these assets grows exponentially over the years the investments are held.

3. Access to your money

How often you wish to access the money contributed to your ISA is another important factor to consider when deciding on your savings strategy. Many Cash ISAs allow regular withdrawals, with the caveat that you will receive a lower interest rate for taking money out. However, Stocks and Shares ISAs are designed to hold different types of investments, and most providers will recommend keeping them for a minimum of five years (although it is often possible to access your money before then if required).

Get the right ISA to support your goals

However you plan to use your allowance, it is important to contribute to the most suitable ISA to maximise your savings over the long term. Flexibility for what you can hold, the potential for savings growth and access to your money are all key considerations when selecting an ISA.

If you aim to benefit from the potential for higher growth in savings, a Stocks and Shares ISA can be a very effective tool for building up long-term savings. For those with more significant financial goals in mind, we recommend speaking to a financial Adviser (or Financial or Wealth Planner) to ensure this type of account will be suitable for your savings goals.

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