What happens to an ISA when someone dies in the UK

When an ISA holder dies, the account does not close straight away. The tax wrapper continues for a period, the money forms part of the estate, and a surviving spouse or civil partner is entitled to an extra ISA allowance equal to the value of the account. The rules depend on who inherits and which type of ISA it is.

This guide covers cash ISAs, stocks and shares ISAs, Innovative Finance ISAs and Lifetime ISAs. Junior ISAs work differently and cannot be inherited as an ISA, so they are covered separately at the end.

The account becomes a "continuing ISA"

From the date of death, the ISA is treated as a continuing account of the deceased. It keeps its tax-efficient status: no income tax and no capital gains tax on any returns inside the wrapper. No new money can be paid in.

The continuing ISA stays open until the earliest of three things happens: the executor or administrator closes it, the administration of the estate is completed, or three years and one day pass from the date of death. If none of those happen sooner, the ISA provider closes the account on the third anniversary plus one day and pays out in line with the will or intestacy rules.

Before April 2018, ISAs lost their tax wrapper on the date of death, which often created a tax bill for beneficiaries during a long probate. The continuing ISA rule fixed that.

Inheritance tax and the ISA

Keeping the tax wrapper is not the same as keeping the money out of the estate. The value of the ISA is added to the estate for inheritance tax purposes. If the total estate exceeds the nil-rate band (currently £325,000), the ISA may contribute to an inheritance tax charge in the usual way.

One exception has long existed for AIM shares held inside a stocks and shares ISA, which could qualify for Business Property Relief after being held for two years. That exception is being reduced. From 6 April 2026, qualifying AIM shares attract 50% Business Property Relief rather than 100%, creating an effective 20% inheritance tax charge on those holdings. If the estate you are administering includes AIM shares inside an ISA, flag this to a probate solicitor early.

For the wider context on when inheritance tax actually applies, see our guide on what is probate.

What a spouse or civil partner inherits

The surviving spouse or civil partner is entitled to two separate things. Most confusion comes from mixing them up.

The first is the money itself. This follows the will, or the intestacy rules if there is no will. If the ISA is left to the spouse, they inherit the cash or investments. If it is left to someone else, they do not.

The second is an Additional Permitted Subscription allowance, usually shortened to APS. This is a one-off extra ISA allowance, equal to the value of the deceased's ISAs, given to the surviving spouse regardless of who actually receives the money. It exists so the surviving spouse can shelter the same amount inside their own ISA, preserving the tax wrapper across the couple.

The APS sits on top of the regular annual allowance (£20,000 for the 2026/27 tax year), not instead of it. And there is one APS per provider the deceased held an ISA with, not one in total. If the deceased held ISAs at three different providers, the surviving spouse receives three separate APS allowances. Each can be transferred in full to a provider of the spouse's choice, but must be transferred in full, not in part.

To qualify for an APS, the surviving spouse or civil partner must have been living with the deceased at the time of death and not legally separated. Separation because of care (for example, one of them in a care home) does not disqualify.

Valuing the APS

The APS is worth the higher of the ISA's value on the date of death, or its value when the continuing ISA is closed. Closing the ISA later, up to three years and one day after death, can produce a larger allowance if the investments have grown in the meantime. The surviving spouse chooses which valuation to use.

Time limits for using the APS

The APS must be used within three years from the date of death, or within 180 days of the estate administration being completed, whichever is later.

Cash subscriptions (paying new money in) can go into a cash ISA, stocks and shares ISA, or Innovative Finance ISA. An "in specie" transfer (moving the actual investments across without selling them) is only possible where the surviving spouse uses the same provider as the deceased, and must be completed within 180 days of the assets being distributed to them.

When someone other than a spouse inherits

Children, siblings, friends and other beneficiaries inherit the value of the ISA, not the ISA wrapper. The money loses its tax-efficient status once it leaves the continuing ISA. There is no APS available to anyone other than a spouse or civil partner.

A beneficiary can shelter inherited money inside their own ISA, but only using their own annual allowance (£20,000 per tax year). For a substantial inheritance, that is a slow route.

What the executor actually does

Find all the ISAs first. Bank statements, paperwork and emails are the main trail. The deceased may have held ISAs with several providers: high-street banks, building societies, investment platforms, and older accounts transferred in from previous providers. Statements from the last twelve months will usually reveal interest payments and dividend credits that point to forgotten accounts.

For accounts the deceased may have lost track of years ago, the My Lost Account service covers dormant cash ISAs with UK banks and building societies, although it does not cover stocks and shares ISAs held with investment platforms.

Notify each provider. Every ISA provider has its own bereavement team and its own process. Most accept a scanned death certificate initially and will ask for a certified copy later. Some will want sight of the grant of probate before releasing funds above a threshold, usually £5,000 to £50,000 depending on the provider.

Get a date-of-death valuation. Request a formal valuation as at the date of death for probate purposes. For a cash ISA this is straightforward. For a stocks and shares ISA, the provider calculates a probate value that goes into the estate accounts.

Decide what to do with the continuing ISA during administration. The executor can leave investments in place, or ask the provider to sell and hold as cash. Leaving investments in place during a long administration can produce meaningful tax-free growth, especially for a stocks and shares ISA, and can increase the APS value available to a surviving spouse.

Confirm the APS value if one applies. The provider will issue a valuation certificate or equivalent that the spouse needs when applying to use the APS, often with a different provider.

Close or transfer on completion. Once the estate is ready to distribute, the executor either closes the ISA and transfers cash to the beneficiaries, or arranges an in specie transfer to the surviving spouse's own ISA.

What to ask the ISA provider

When contacting a bereavement team for the first time, ask for four things in the same call, so you do not have to keep going back:

• The process for notifying them of the death and what documentation they need (scanned copy of the death certificate, certified copy, grant of probate, letter of authority).

• A date-of-death valuation for probate purposes.

• Whether the ISA will be held as a continuing ISA with investments in place, or converted to cash, while administration runs.

• If a spouse is involved, the APS valuation and the process for transferring the allowance, including whether the provider accepts APS transfers from other providers.

Providers vary. Some will only speak to the executor named in the grant of probate. Some will deal with next of kin on the strength of a death certificate alone while waiting for probate. Knowing the difference saves weeks.

Common misconceptions

There are a few things that come up repeatedly in conversations with bereaved families and worth correcting directly.

The spouse does not automatically inherit the money. They automatically get the APS. The money itself follows the will. A deceased who left their ISA to their children gives the children the money and the spouse an empty APS of the same value.

The APS is not singular. A deceased with ISAs at three providers produces three APS allowances. The surviving spouse can consolidate them or use them separately, but they are distinct.

The APS does not count towards the annual £20,000. It is extra.

The continuing ISA wrapper is tax-free for income and capital gains during the period it runs. The ISA value is still counted towards inheritance tax on the estate. Tax-free inside the wrapper does not mean exempt from IHT.

There is no legal rush to close the ISA. Executors sometimes close everything quickly to simplify the paperwork. For a stocks and shares ISA during a growing market, that can cost the estate (and the APS) real money.

Variants: Lifetime ISA, Help to Buy ISA, Junior ISA

A Lifetime ISA on death is treated like any other ISA. The 25% withdrawal charge that normally applies to unauthorised withdrawals does not apply on death. The funds form part of the estate, and a surviving spouse gets an APS of the same value.

A Help to Buy ISA (no longer available to new savers, but many existing accounts remain) is treated like a cash ISA on death. An APS applies.

A Junior ISA belongs to the child, not the parent, so it does not form part of a parent's estate. If the child dies, the money forms part of the child's estate but does not transfer as an inheritable ISA. No APS applies.

If this is more than you can manage

Identifying every ISA the deceased held, including older accounts transferred or consolidated years ago, is one of the harder parts of estate administration. ISA providers are not joined up. Statements do not always make it obvious what is an ISA and what is a general savings account.

Legacy Trail finds the accounts the deceased held and notifies each provider centrally, so the bereavement teams have what they need and you do not have to repeat the same conversation dozens of times.