UK savers hold roughly £872 billion inside ISAs — around 21.3 million adults, with an average pot of about £34,044 (HMRC ISA statistics, to April 2024). Yet most holders never check what happens to that money when they die, and the ISA inheritance rules trip up two things almost everyone gets wrong: an ISA is not automatically free of inheritance tax, and your spouse does not simply "keep the ISA" — they inherit a separate allowance called the APS.
This guide explains exactly what happens to your ISA when you die, how the Additional Permitted Subscription lets a surviving spouse or civil partner rebuild the tax-free wrapper, why the ISA still counts towards your estate, and the deadlines that quietly waste the relief if you miss them. If your ISA is mostly funds or trackers, understanding how those holdings pass on matters as much as picking them — our ETF investing and trading course covers the long-term side of that story.
- An ISA loses none of its income-tax and capital-gains shelter at death for up to three years — it becomes a "continuing account of a deceased investor".
- An ISA is still part of your taxable estate. There is no special inheritance-tax exemption for ISAs.
- A surviving spouse or civil partner gets an Additional Permitted Subscription (APS) equal to your ISA value — on top of their own £20,000 allowance.
- The APS is available even if you leave the actual ISA money to someone else.
- Unmarried partners get neither the APS nor the spouse inheritance-tax exemption.
What happens to your ISA when you die?
When you die, your ISA becomes a continuing account of a deceased investor. For deaths on or after 6 April 2018, its investments stay free of Income Tax and Capital Gains Tax until the estate is settled, the account is closed, or three years pass — whichever comes first. No new money can be paid in.
That is the part people find reassuring. The part they miss is what happens next: once the continuing-ISA period ends, the money simply forms part of your estate and is distributed under your will (or the intestacy rules if you have no will). At that point the tax wrapper is gone, and a different tax — inheritance tax — may already apply to the value.
Before 6 April 2018 there was no continuing-ISA status at all: income and gains arising during the administration of the estate were taxable. The rule change was specifically designed to stop grieving families losing the shelter while probate dragged on.
Is an ISA free from inheritance tax?
No. This is the single biggest misconception about ISA inheritance rules. The full value of your ISA is counted as part of your taxable estate. Inheritance tax is charged at 40% on the value of an estate above the £325,000 nil-rate band, with a further residence nil-rate band of up to £175,000 where a main home passes to direct descendants (an ISA itself does not qualify for that residence band).
What actually removes the tax is not the ISA wrapper — it is who inherits. Transfers between UK-domiciled spouses and civil partners are 100% exempt from inheritance tax, with no upper limit. Leave your ISA to your husband, wife or civil partner and there is no inheritance tax on it. Leave the same ISA to a child, sibling or friend and it is taxed like any other asset in the estate.
Inheritance tax on a £400,000 ISA — by who inherits it
Illustrative: a £400,000 ISA assessed alone. Child case = 40% x (£400,000 − £325,000). "No band left" assumes the £325,000 nil-rate band was used by other gifts. Rates and bands: MP Estate Planning and WillSafe, 2026.
What this means for you: the ISA wrapper is worthless against inheritance tax. If passing wealth to a spouse tax-efficiently is the goal, the exemption does the work — and pensions behave very differently again, which is why the SIPP vs ISA comparison matters so much for estate planning.
The Additional Permitted Subscription (APS): inherit the wrapper, not just the money
Here is where the ISA inheritance rules get genuinely useful. When you die, your surviving spouse or civil partner gets an Additional Permitted Subscription (APS) — a one-off extra ISA allowance equal to the value of your ISA. It sits on top of their own annual allowance (£20,000 for 2026/27), so the family can keep the same amount sheltered inside an ISA going forward.
To be eligible, the survivor must have been your spouse or civil partner, you must have died on or after 3 December 2014, and you must have been living together (not separated under a court order or in circumstances where the marriage had broken down) at the date of death. A cohabiting partner — however long the relationship — gets nothing here.
How the APS allowance is calculated
The APS is the higher of your ISA value at the date of death or its value at the date the allowance is used (or the investments are transferred). That "higher of" rule protects the survivor if markets rise during the administration period. So a £60,000 stocks-and-shares ISA that grows to £66,000 before transfer produces a £66,000 APS, not £60,000.
Can your spouse inherit the APS if you leave the ISA to someone else?
Yes — and this is the rule almost nobody expects. The APS is an allowance, not the money itself. Your spouse or civil partner is entitled to it regardless of who actually inherits the ISA cash under your will.
An example makes it concrete. Say you leave your £50,000 ISA to your daughter. Your daughter receives the £50,000 (subject to any inheritance tax on the estate). Separately, your surviving spouse still gets a £50,000 APS allowance — which they can fund from their own savings, sheltering an extra £50,000 inside an ISA on top of their normal £20,000.
The catch: the survivor needs the cash to use the allowance. An APS is worth nothing if there is no money to subscribe. This is where families sometimes plan ahead, making sure the surviving partner has liquid funds to take advantage of an inherited allowance that would otherwise expire unused.
Some couples solve this deliberately — by keeping enough accessible savings on the side, or by structuring the will so the surviving partner receives cash they can immediately recycle into their own ISA using the inherited allowance before the deadline closes.
The continuing ISA: how long your money stays tax-free after death
The continuing-account status is generous but time-limited. Your ISA keeps its Income Tax and CGT shelter until the earliest of three events:
- the administration of your estate is completed;
- the account is closed by the executor or provider; or
- the third anniversary of your death.
During that window the investments can still be actively managed — an executor can sell and switch holdings inside the account — but no new subscriptions are allowed. That includes replacement subscriptions: if you held a flexible ISA and had withdrawn money before death, your estate cannot replace it after you die. The flexibility dies with the holder.
Providers also differ in how they run a continuing account — some effectively freeze it, while others let the executor keep buying and selling within the wrapper. It is worth asking each ISA manager exactly what they allow rather than assuming the shelter automatically runs the full three years.
Once the window closes, the wrapper is removed and the assets pass into the estate for distribution. Any income or growth after that point is taxable in the normal way in the hands of the estate or the beneficiary.
How to claim the APS allowance: steps and deadlines
The APS is not automatic — someone has to claim it, and the deadlines are strict. Here is the sequence for a surviving spouse or civil partner.
Source: Aviva Additional Permitted Subscriptions guide and GOV.UK APS guidance, 2026.
What this means for you: if the estate is complex and probate is slow, the "180 days after administration completes" clock is your friend for cash — but the 180-day in-specie window runs from when ownership passes, so investors who want to stay in the market must move quickly. If you are consolidating an inherited ISA into your own, our guide on how to transfer an ISA without losing its tax-free status walks through the mechanics.
Married, unmarried or other: who actually gets what
Marital status is the dividing line that decides both reliefs. This table shows how the same ISA is treated depending on who survives you.
| What they get | Spouse / civil partner | Unmarried partner | Child / other beneficiary |
|---|---|---|---|
| APS allowance | Yes — equal to ISA value | No | No |
| Inheritance tax on the ISA | Exempt (if left to them) | Taxable in the estate | Taxable in the estate |
| Continuing-ISA tax shelter | Up to 3 years | Up to 3 years | Up to 3 years |
| Receives the ISA money? | Only if named in the will | Only if named in the will | Only if named in the will |
Source: interactive investor and Hargreaves Lansdown APS guidance; WillsConnect spouse-exemption guide, 2026.
The takeaway is uncomfortable but important: the continuing-ISA shelter treats everyone equally, but the two valuable reliefs — the APS and the inheritance-tax exemption — are reserved for spouses and civil partners. For unmarried couples, that gap is the strongest single argument for reviewing your wills and wider estate plan together.
Frequently asked questions
This article is educational content, not tax, legal or investment advice. ISA and inheritance-tax rules change and depend on your circumstances; confirm the current rules before acting.
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