Inheriting an ISA

What happens with an ISA after death? 

When you die, your ISA won’t automatically close. Instead, it will become a ‘continuing ISA’. It'll stay tax-efficient and continue to benefit from any growth, whether through cash interest rates or investments. But you can't add more money to the account.

Your ISA will close when:

• the administration of your estate is complete or,

• the executor of your will closes the account.

Who can inherit an ISA? 

A spouse, civil partner, or anybody named as a beneficiary to an estate can inherit the value of an ISA in cash. Nobody can inherit the ISA account itself after death.

The ISA inheritance rules allow a spouse or civil partner to automatically inherit the tax-free value of your ISA after you die, unless you have selected a different beneficiary in your will.

You can inherit any type of ISA except a Junior ISA. This includes: 

• Cash ISA 
• Stocks and Shares ISA 
• Lifetime ISA 
• And Innovative Finance ISA 

A child can inherit the value of an ISA – but not the tax wrapper itself. Instead, the money forms part of the estate and may be subject to inheritance tax.

ISA inheritance allowance 

An inherited ISA allowance is called the Additional Permitted Subscription (APS). The APS is an increased one-off allowance. This allowance is on top of a spouse or civil partner's annual allowance (£20,000 for the 2024/25 tax year). 

Read our Additional Permitted Subscription (APS) page for further detail.

Example 

Your deceased spouse or civil partner’s ISA was worth £40,000 and they have left that money to you. This becomes your Additional Permitted Subscription. Your annual allowance would rise from £20,000 to £60,000 for a single year while the money transfers to your account. After you have used the APS, your allowance would revert to the usual £20,000 for the following tax year. 

Inheriting an ISA from a parent 

If your children are named as your beneficiaries, then they will receive the value of your ISA in cash.

This applies to anyone except your spouse or civil partner who inherit the value into their own ISA.

ISAs and Inheritance Tax 

ISAs can shield your money from several kinds of tax; dividend tax, income tax, and capital gains tax. Whether an ISA will be subject to inheritance tax (IHT) depends in part on who the beneficiary is. 

• If you are inheriting your deceased spouse or civil partner’s ISA, you will not have to pay inheritance tax.
• If you inherit an ISA and aren't the spouse or civil partner of the deceased, then you'll pay IHT. 

The current tax-free threshold on the whole estate value is £325,000. So anything above that amount will usually have 40% IHT applied.

AIM Shares and Inheritance Tax 

If you have invested in the Alternative Investment Market (AIM) with your ISA, the value of those investments may not be subject to inheritance tax.  

We have a page dedicated to explaining AIM ISAs in further detail, so head there if you want a deep dive on that topic. 

Certain AIM shares qualify for Business Property Relief.  After being held for two years, the value of any qualifying AIM shares in your ISA will be excluded from your inheritance tax calculation.  

Investing in these eligible AIM shares via an ISA means that your inheritors can receive 100% of their value.