Cash vs Stocks & Shares vs Lifetime ISA
How the three ISA types on this site differ — what they're for, how they're taxed, and a couple of genuinely significant changes on the horizon worth knowing about.
This describes how each ISA type works, not which one you should choose or how to split your allowance between them. See our Terms & Conditions for why we're not the right people to ask that.
All three share one overall allowance — £20,000 per person for the 2026/27 tax year, split however you like between them. The Lifetime ISA has its own £4,000 sub-limit that counts within that £20,000, not on top of it — so £4,000 into a LISA leaves £16,000 remaining across the others.
Cash ISA
Tax-free interest on cash savings, with no exposure to market ups and downs. Suits money you don't want at risk of losing value in the short term.
Stocks & Shares ISA
Tax-free growth on investments — interest, dividends and capital gains all shielded from tax, with no cap on how large the pot grows. Value can go down as well as up, unlike a Cash ISA.
Lifetime ISA
The government adds 25% on top of what you contribute — up to £1,000 a year on the maximum £4,000 contribution. You must open one before turning 40, and can keep contributing until 50. The money can go toward a first home costing £450,000 or less, or be accessed from age 60 for any purpose.
Withdrawing for any other reason before 60 currently triggers a 25% government charge — applied to the whole withdrawal, not just the bonus, so it's possible to get back less than you paid in.
Two changes worth knowing about, announced at the Autumn 2025 Budget:
From April 2027, the Cash ISA allowance for under-65s is set to reduce from £20,000 to £12,000 (over-65s keep the full £20,000). The overall £20,000 combined allowance stays the same — the remaining amount would need to go into a Stocks & Shares, Lifetime, or Innovative Finance ISA instead.
The Lifetime ISA is also due to be replaced. A government consultation on a new "First-Time Buyer ISA" closed in August 2026, with a target launch around April 2028. Based on what's been published so far, the replacement is expected to drop the retirement-access feature entirely (first- home purchases only) and remove the 25% early-withdrawal penalty. Nothing changes for existing LISA holders in the meantime — you can still open and contribute to one under the current rules right now.
This is a fast-moving area — check gov.uk for the current confirmed position before relying on the detail above.
All three calculators draw their growth, interest and inflation assumptions from UK Rates, so changing the scenario there applies consistently across all of them.
This page describes how each ISA type currently works and what's publicly known about upcoming changes — not a recommendation for how to split your own allowance. See our Terms & Conditions for the full detail, or our overview of every calculator to browse the rest.