Inheritance ISA allowance guide

If your spouse or civil partner passes away, you will be eligible to receive an inheritance ISA allowance. Otherwise known as an Additional Permitted Subscription (APS), your inheritance ISA allowance is in addition to the annual ISA allowance you already receive, and means you could benefit from paying less tax on your savings.

However, this doesn’t mean you will directly inherit the money in your partner’s ISA(s). Instead, you will inherit the additional one off extra ISA allowance which will be equal to the value of the ISAs they held.

For example, if your partner has £10,000 saved into an ISA and they pass away, you will be entitled to save an extra £10,000 tax-free on top of your existing £20,000 ISA allowance 2024/2025.

No, your inheritance ISA allowance does not affect your ISA allowance. Instead, it is an extension of your existing allowance.

Any ISAs your partner held, whether they were cash ISAs or stocks and shares ISAs, will count towards your inherited ISA allowance. The only exception is the junior ISA, wherein there is no inheritance ISA allowance and any money in the junior ISA will be paid to whoever inherits their estate.

When it comes to how much ISA inheritance you’re entitled to, this amount will depend on when the death occurred.

If you lost your partner on or before 5th April 2018, your inheritance ISA allowance will be the value of your partner’s ISA(s) on the date they passed away.

If your partner died on or after 6th April 2018, you can inherit an ISA allowance that is the value of your partner’s ISA at the date of death. However, you also have the option of letting your partner’s ISA(s) remain open and earning interest (a "continuing ISA"), and you can then inherit an ISA allowance that is the value of your partner’s ISA(s) at account closure.

When an investor passes away, an ISA is reclassified as a ‘continuing ISA.’ Though no money can be paid into it at this point, it will continue to benefit from the tax advantages of an ISA. This means any interest earned will remain tax-free.

A continuing ISA remains until either:

• The administration of the estate is complete
• The ISA is closed
• It’s been three years since death

The account can remain an ISA until a maximum of three years since the death of the investor.

Your inheritance ISA allowance will be available for three years after your partner has passed away, or 180 days after the administration of the estate has been completed; whichever one is the later date.

To receive the allowance, you will need to provide the following to your bank, building society or ISA provider:

• The date of your marriage or civil partnership (evidence of the marriage or civil partnership may be sought)
• Your partner’s date of birth and the date they passed away
• Your partner’s address at the time they passed away
• Yours and your partner’s National Insurance numbers

No, your children can not inherit your ISA currently. Neither can unmarried partners and other family members.

To receive the inheritance ISA allowance, you will need to be married to or in a civil partnership with the deceased. 

You will also need to be living together and not legally separated or in the process of becoming legally separated.

ISA rules on death of holder dictate that the ISA will end when:

• The executor closes it
• Or the administration of the estate is completed

Otherwise, your ISA provider will close your ISA three years and one day after you have passed away.

Up to this date, there will be no Income Tax or Capital Gains Tax to pay, but ISA investments will form part of your estate for Inheritance Tax purposes.

Your ISA provider can be instructed to either:

• Sell the investment and pay the proceeds to the administrator or beneficiary of your estate
• Transfer the investments to your surviving spouse or civil partner. This is only possible if they have the same ISA provider as you.