What happens to my ISA when I die?

Planning your estate supports your family through the hardest of times, ensuring your hard-earned cash gets to where it’s supposed to be going. We'll take you through your next steps to help you understand what happens to your ISA after you die.

If you pass away while your ISA is still active, it becomes a 'continuing deceased's account'. A continuing ISA will stay open and invested for three years and one day from the date of your death. ^{Footnote [1]} It will also retain all its tax benefits but won’t be able to receive any more funds. It may also be closed by the executor of your estate once they’ve completed the administration of your estate. ^{Footnote [1]}  

If your spouse or civil partner leaves an ISA, you’ll get something called an Additional Permitted Subscription (APS), which lets you make additional contributions to your own ISA. This will also apply to you whether you inherit the ISA or not.

The APS allowance is equal to the value of the deceased person’s ISA on the date they die or the date the ISA is closed, whichever value is higher. ^{Footnote [2]} The allowance must be used within three years of the person’s death or within 180 days after the administration of their estate is completed, whichever is later. 

You can use the APS to increase your own personal ISA allowance, either on your existing ISA, or on new one which accepts APS allowances. The allowance can be added to a cash ISA, stocks and shares ISA, or innovative finance ISA. 

Will there be any inheritance tax to pay?

Any money left to you as a surviving spouse or civil partner is free of inheritance tax. However, if you are a beneficiary other than a spouse or civil partner then the value of the ISA will be factored into the person's estate. So, if the total value of the estate exceeds the IHT threshold (currently £325,000), the excess may be subject to a 40% tax rate.

You can check if you or your family might have to pay Inheritance Tax by using our Inheritance Tax Calculator.

If you inherit an ISA, there are a couple of ways you can use it. Which option you choose is entirely up to you, but if you’re unsure, it’s best to speak to a financial adviser. 

• Transferring ISA investments – If you want to transfer the ISA investments as funds instead of cashing them in, that should be easy if the investment account you want to transfer them to is with the same provider. It may also be possible if the new account provider offers exactly the same funds as were in the deceased's ISA.
• Selling investments and turning them to cash – This can be done by the executor or administrator of the estate. They can instruct the ISA provider to sell all investments and then distribute the proceeds to beneficiaries. However, once investments are sold, the money will no longer be protected from Income Tax or Capital Gains Tax.
• Holding onto an ISA temporarily – Once the ISA has been turned into a continuing deceased's account, the ISA can stay open for up to three years and one day after the person's death. The investments in the account will continue to keep their tax benefits in the form of tax-free income and capital gains, in the time it remains open.

If you continue to hold investments in an ISA, please remember that the value of investments can go down as well as up and you may get back less than the amount you put in.