Can I Have a Cash ISA and a Stocks and Shares ISA?
Understand how to combine Cash and Stocks and Shares ISAs for tax-efficient savings and investments. Learn the rules for contributions and managing your annual allowance effectively.
Individual Savings Accounts (ISAs) offer a tax-efficient way to save and invest, allowing your money to grow free from UK income tax and capital gains tax. You can hold both a Cash ISA and a Stocks and Shares ISA simultaneously, providing a diversified approach to managing your savings and investments. This flexibility allows you to utilize these accounts for various financial objectives, provided specific regulations are followed.
Understanding ISA Types
A Cash ISA functions as a savings account where interest earned is free from UK tax. It is a lower-risk option, suitable for preserving capital and accessing funds easily. Cash ISAs are often used for short-term savings or emergency funds, as your capital’s value does not fluctuate with market performance.
A Stocks and Shares ISA is an investment account designed for longer-term wealth growth. You can invest in assets like company shares, investment funds, and bonds. While offering potential for higher returns, investment values can fluctuate, meaning you could get back less than you invested. This ISA is recommended for those prepared to invest for at least five years.
Rules for Opening and Contributing to Multiple ISAs
Recent changes to ISA regulations have introduced greater flexibility in how individuals can contribute to ISAs. Previously, you could only subscribe to one ISA of each type in a single tax year. Now, it is possible to open and contribute to multiple ISAs of the same type within the same tax year, in addition to contributing to different types of ISAs.
This means you can contribute to a new Cash ISA and a new Stocks and Shares ISA in the same tax year. You could also contribute to two different Cash ISAs from separate providers within the same tax year. Your total contributions across all ISAs must not exceed your overall annual allowance. You can continue to hold multiple ISAs from previous tax years indefinitely.
Managing Your Annual ISA Allowance
A single annual allowance applies across all ISAs you contribute to in a given tax year. For the 2025/2026 tax year, this allowance is £20,000. The total amount you deposit into your Cash ISA, Stocks and Shares ISA, and any other ISA types, cannot exceed this limit. For example, if you contribute £5,000 to a Cash ISA, you would have £15,000 remaining to allocate to a Stocks and Shares ISA or other eligible ISAs.
To maintain the tax-efficient status of your savings, follow formal transfer procedures when moving funds between ISAs. Funds can be transferred from one ISA provider to another, or from one type of ISA to another, without affecting your current year’s allowance. This ensures the money remains within the tax-free wrapper. Withdrawing funds yourself and re-depositing them into a new ISA will count against your current year’s allowance and could lead to a loss of tax benefits.