Everything you need to know about inheriting ISAs
When a spouse or civil partner dies, you may be able to inherit the value of their ISA without losing its tax-free status through the Additional Permitted Subscription (APS). This allowance applies if you were married or in a civil partnership at the time of death and not formally separated.
For many couples, financial planning is something they do together. Understanding how inherited ISAs work — and what you’re entitled to — can help ensure those plans continue temporarily after a spouse passes away.
Below, we explain what an ISA is, who can inherit one, and the recent changes to the ISA allowance.
First, what is an ISA?
An Individual Savings Account (ISA) is a UK government scheme that allows you to save or invest tax efficiently. You don’t pay income tax on any interest, dividends or profits earned through an ISA.
There are several types of ISA, including:
- Cash ISA – holds savings in cash
- Stocks & Shares ISA – invests into assets such as shares and bonds
- Lifetime ISA – for first-homebuyers or retirement savings
- Innovative Finance ISA – for peer-to-peer lending
You can pay up to £20,000 per tax year into ISAs, known as the ISA allowance.
What happens to an ISA when someone dies?
An ISA doesn’t close immediately on death. Instead, it becomes a “continuing ISA”. The account stays tax-efficient while the estate is being administered, and any interest or investment growth remains tax-free. However, no new money can be added.
The ISA is closed either when the estate administration is complete, when the executor instructs the provider to close it, or on the third anniversary of the death of the account holder if these first two do not occur earlier.
Importantly, nobody can inherit the ISA account itself. What can be inherited is the value of the ISA — and for spouses or civil partners, the associated tax benefits.
Who can inherit an ISA?
Anyone named as the beneficiary can inherit the value of an ISA. However, the tax treatment depends on their relationship to the deceased.
Spouses and civil partners
If you were married or in a civil partnership at the time of death, you’re entitled to a special allowance called the Additional Permitted Subscription (APS) — more on that below. In short, an APS allows you to inherit the value of your partner’s ISA without losing its tax-free status. You don’t need to have been living under the same roof; being apart for reasons such as long-term care does not affect eligibility, as long as you weren’t formally separated or the relationship hadn’t permanently broken down.
Other beneficiaries (including children)
Children and other beneficiaries can inherit the value of an ISA, but not the tax-free allowance. The money becomes part of the estate and may be subject to inheritance tax (IHT), depending on the total estate value.
What is an Additional Permitted Subscription (APS)?
An APS is a one-off increase to your ISA allowance, available only to surviving spouses or civil partners. It’s worth stressing that the APS is not a lump sum you receive, but rather an increase to the amount you’re allowed to put into ISAs during the relevant tax year.
The APS is based on the value of the deceased’s ISA savings. This value is taken as whichever is higher of:
- the value of the ISA(s) on the date of death, or
- the value of the ISA(s) when they stop being a continuing ISA (for example, when probate is completed or the account if closed).
This ensures the surviving spouse or civil partner doesn’t lose out if the investments fall in value during the probate process.
Your APS is added on top of your normal ISA allowance for that tax year. For example, if your spouse had £30,000 saved across their ISAs and named you as the beneficiary. This amount becomes your APS and is added to your normal ISA allowance of £20,000. For that tax year only, your total ISA allowance becomes £50,000.
Importantly, even if your partner leaves their ISA to someone else in their will, you are still entitled to an APS of the same value.
Recent changes to the ISA allowance
The ISA allowance changed slightly in the most recent Autumn Budget. The £20,000 annual ISA allowance remains in place until at least 2031, but from April 6 2027, people under 65 will be limited to saving £12,000 per year into Cash ISAs.
If you’re under 65, think of it like this: you can still save up to £20,000 in ISAs, but only £12,000 of that can go into a Cash ISA. You'll have to use a different type of ISA, such as a Stocks & Shares ISA, to make up the rest.
People over 65 can still put the full £20,000 into Cash ISAs, if they wish.
How do you claim an inherited ISA?
First, you’ll need to contact the ISA provider(s) and notify them of the death. You’ll complete an application and provide details about the deceased and your relationship. There are different deadlines for completing these steps, depending on the circumstances.
If you’re navigating an inherited ISA, a financial adviser can help you make the most of the allowances available and help to support with the administrative burden at a difficult time.
Important information
This article is for information purposes only. It is not intended as financial advice. The different scenarios discussed are examples and what is right for each person will depend on individual circumstances.
Fees and charges apply.
There is no guarantee by investing money it will keep level or beat inflation, particularly when inflation is high.
Tax treatment depends on your individual circumstances and may be subject to change in the future.
Cash savings and investments are protected to the value of £120,000 and £85,000 respectively, per person per institution by the Financial Services Compensation Scheme (FSCS). However, the value of investments may fall as well as rise.
