£500 a month for 20 years grows to roughly £194,000 in a Cash ISA at 4.5%, and about £277,000 in a Stocks & Shares ISA at 7.5%. From April 2027, the enacted £12,000 annual cash limit applies if you are 64 or under at tax-year end. Here is when each account earns its place.
Adjust the variables below to simulate outcomes, compare rates, and see real-time projections.
A direct comparison of features, rules, limits, and eligibility requirements.
| Feature / Detail | Cash ISA | Stocks & Shares ISA |
|---|---|---|
Annual limit today | £20,000 shared allowance: any split you like until 5 April 2027 | £20,000 shared allowance |
Annual limit from 6 April 2027 | £12,000 a year if 64 or under at tax-year end; £20,000 if 65+ at year end | Up to the full £20,000 |
Risk to capital | No market-price swings; eligible deposits are FSCS-protected up to £120,000 per person per UK-authorised firm | Full market risk; values fall as well as rise |
Tax treatment | Interest 100% tax-free | Gains and dividends stay tax-free; from April 2027, cash-deposit interest inside faces the savings basic rate (22% in 2027-28) |
Rate assumption in the worked example | 4.5% a year held constant for illustration; actual cash rates and account terms change | 7.5% a year held constant for illustration, before fees; actual market returns can be negative |
Right time horizon | Money needed within about 5 years | Money you can leave for 5+ years through the dips |
Analyze the advantages and drawbacks of each financial product before making a decision.
Priya saves £500 at the end of each month. In a Cash ISA earning a constant 4.5%, twenty years of deposits (£120,000 in total) grow to about £194,100. In a Stocks & Shares ISA earning a constant 7.5% before fees, the same deposits reach about £276,900. The modelled difference is about £82,800. Neither rate is a product quote or a forecast.
Notice where the gap lives under these assumptions: after five years it is about £2,700. By year ten it is about £13,400; by year twenty it is about £82,800. Actual equity returns will vary and may be negative when Priya needs the money, so this growing modelled gap does not establish a return premium she can bank on.
Cash is useful for money with a near deadline because its nominal balance does not track market prices. For a longer horizon, compare the possibility of higher investment growth with the risk of loss and the actual charges you would pay.
The Individual Savings Account (Amendment) (No. 2) Regulations 2026, SI 2026/1018, were made on 10 September and take effect on 6 April 2027. Regulation 6 limits aggregate cash ISA subscriptions to £12,000 in any tax year in which the saver is 64 or under at year end. A saver who is 65 by that year end retains the £20,000 cash option. The overall £20,000 ISA allowance is unchanged. It is an annual ceiling: you can use it in one deposit or spread it across months.
The remaining £8,000 is optional headroom, not an order to buy shares. If you want to use the full ISA allowance, you can subscribe the rest to a stocks and shares or innovative finance ISA. You can also leave that portion unused or hold further cash outside an ISA, where interest may face savings tax after your Personal Savings Allowance. SI 2026/1018 regulation 15 imposes a charge at the savings basic rate on cash-deposit interest inside non-cash ISAs; Finance Act 2026 section 5 sets that rate at 22% for 2027-28. That rule targets interest, not the £8,000 principal itself.
Priya saves £500 a month, only £6,000 in a year, so the new £12,000 cash limit never binds her example. A saver who puts £20,000 of new cash into ISAs each year would face a choice after 6 April 2027 if aged 64 or under at year end. Existing cash ISA balances remain sheltered. The 2026-27 tax year is the final unrestricted annual cash-subscription year for someone who will still be below the age boundary in 2027-28.
Run £10,000 through ten years at 2.5% inflation. In a 4.5% Cash ISA it becomes £15,530 nominal, but only about £12,130 of today's purchasing power. In a 7.5% equity portfolio it becomes £20,610 nominal, roughly £16,100 real. Cash preserved the money; equities grew it. Over a working lifetime, that distinction is the whole ballgame for wealth building.
A Cash ISA deposit does not move with share prices, but inflation can erode its purchasing power. FSCS confirms that eligible deposits have been protected up to £120,000 per person per UK-authorised firm since 1 December 2025; balances above that limit need separate attention. The useful question is when the money is needed and how much market loss the saver could absorb.
One transfer detail changed with SI 2026/1018 regulation 13. A formal transfer from a cash ISA to a non-cash ISA, or between accounts of the same type, preserves the wrapper without becoming a new subscription. From 6 April 2027, transfers from stocks and shares or innovative finance ISAs back into a cash ISA are permitted only if the saver is 65 or over at tax-year end. Withdrawing and re-depositing is different: it can use fresh allowance. Ask the receiving provider to run a permitted ISA transfer rather than moving money through your bank account.
Priya's £500-a-month example grows to about £194,000 in cash at 4.5% or £277,000 in investments at 7.5% over 20 years. That £83,000 modelled gap rewards a long runway, not a three-year house deposit. SI 2026/1018, made in September 2026 and effective 6 April 2027, caps cash ISA subscriptions at £12,000 a year if you are 64 or under at the tax-year end; the overall ISA allowance remains £20,000. You may invest up to the unused £8,000 in a stocks and shares or innovative finance ISA, leave that allowance unused, or save outside an ISA. No rule forces an investment. Cash-deposit interest held inside a non-cash ISA faces the enacted savings-basic-rate charge, 22% for 2027-28 under Finance Act 2026 section 5. If you need cash soon, accept that the tax shelter on new cash has a lower annual ceiling rather than buying market risk to fill an allowance.
Emergency funds, house deposits within 5 years, and anyone who is 65 or over at tax-year end and keeps the full £20,000 cash subscription option from 2027-28.
Long-term goals for savers with enough time and financial capacity to withstand a market fall without selling at a loss.
These links include relevant regulators and page-specific references. Worked examples and projections may also use stated assumptions:
