When someone dies, their financial affairs can feel confusing and overwhelming – and ISAs (Individual Savings Accounts) are no exception. Understanding what happens to ISAs after death can help you plan ahead, support loved ones, and avoid unnecessary tax surprises.
This complete guide explains, in clear terms, what happens to Cash ISAs, Stocks & Shares ISAs and other ISA types when the account holder dies, and what this means for spouses, partners and other beneficiaries.
Do ISAs end when you die?
Yes. An ISA is a tax-efficient wrapper that belongs to an individual. When that person dies, the ISA itself stops being an ISA for tax purposes, but the money and investments inside it do not disappear.
Key points:
- The ISA holder’s tax-free status stops on death.
- The account becomes part of their estate.
- The funds or investments are passed on to beneficiaries according to the will or intestacy rules.
- A surviving spouse or civil partner may receive extra ISA allowances (called an “Additional Permitted Subscription” or APS).
What happens immediately after death?
When a bank, building society or investment platform is notified of a death, they will:
- Freeze the ISA to new payments
No further contributions can be paid into the deceased person’s ISA. - Reclassify the account
It stops being an ISA in the usual sense, but in many cases it becomes a “continuing account of a deceased investor”. - Request documents
Typically they will ask for:- The death certificate
- Grant of Probate or Letters of Administration (if required)
- Identification for executors or administrators
The funds remain invested or on deposit until the estate is settled or instructions are received from the executors.
Continuing ISA status after death
Since April 2015, ISAs can keep some of their tax advantages for a period after death.
Continuing account of a deceased investor
An ISA can continue as a “deceased ISA” while the estate is being administered. During this time:
- Income and gains remain tax-free within the ISA wrapper.
- The account can usually remain invested in the same way as before.
- No new contributions can be added.
This continuing status ends on the earliest of:
- The date the ISA is fully closed and paid out;
- The date all investments are transferred out of the ISA; or
- Three years and one day after the date of death.
After this point, any further income or gains may become taxable in the hands of the estate.
What happens to different types of ISAs?
Cash ISAs
- Interest earned up to the date of death is tax-free.
- During the “continuing” period, interest may still be received without income tax.
- When the account is closed and paid to the estate, the cash is just like any other asset – it becomes part of the estate to be distributed.
Stocks & Shares ISAs
- The investments (shares, funds, bonds, etc.) are valued as at the date of death.
- Any growth or income within the ISA during the continuing period remains free of Capital Gains Tax and income tax.
- Eventually the holdings will either:
- Be sold and the proceeds paid to the estate; or
- Be transferred “in specie” (i.e. as actual investments) to beneficiaries, depending on the provider and instructions.
Lifetime ISAs and Innovative Finance ISAs
- These follow very similar principles.
- The Lifetime ISA government bonus does not have to be repaid on death.
- The value of the account is added to the estate for Inheritance Tax purposes.
ISAs and Inheritance Tax (IHT)
A common misconception is that ISAs are exempt from Inheritance Tax. They are not.
- The value of all ISAs is included in the estate for IHT calculations.
- If the total estate exceeds the available nil‑rate band (and residence nil‑rate band where applicable), Inheritance Tax may be due.
- The fact that an ISA was tax-free during life does not shelter it from IHT on death.
The executor or personal representative is responsible for including ISA values on the IHT forms, using the provider’s statement of value at the date of death.
What happens to ISAs if there is a surviving spouse or civil partner?
This is where ISAs have a valuable extra feature: the Additional Permitted Subscription (APS).
What is an APS allowance?
An APS allows a surviving spouse or civil partner to inherit the ISA allowance of the person who has died, on top of their own annual ISA allowance.
- It is not a transfer of the ISA itself.
- It is an extra amount they are allowed to pay into ISAs in their own name.
- The APS is equal to the higher of:
- The value of the ISA at the date of death; or
- The value when the ISA stops being a continuing account (e.g. on closure).
For example:
If your spouse dies with £60,000 in ISAs, you may gain an APS of £60,000, in addition to your normal annual ISA allowance.
Who can receive an APS?
- Only a spouse or civil partner can receive an APS.
- Unmarried partners, even if you lived together, are not eligible.
How does the APS work in practice?
The surviving spouse can:
- Open a new ISA using the APS allowance; or
- Use the APS to pay into an existing ISA with an APS‑accepting provider.
There are usually time limits:
- For cash inherited: typically within three years of death, or 180 days after the estate is settled (whichever is later).
- Different timelines may apply depending on the provider and the type of ISA.
The surviving spouse does not have to inherit the actual ISA funds to receive the APS, although in practice these often go together.
What if there is no spouse or civil partner?
If there is no surviving spouse or civil partner:
- No APS is created.
- The ISAs simply form part of the estate like any other savings or investments.
- Beneficiaries (such as children) will inherit the money or investments, but not an extra ISA allowance.
Those beneficiaries are free to invest what they receive into their own ISAs, subject to their standard annual allowance limits.
How are ISA funds actually paid out?
Once Probate or Letters of Administration are granted (where required), the executors can instruct the ISA provider.
Common options:
- Cash in and pay to the estate
- The provider sells any investments.
- The proceeds are paid into the estate account for distribution according to the will or intestacy rules.
- Transfer investments to beneficiaries
- Some providers allow an “in specie” transfer of shares or funds directly to beneficiaries’ own investment accounts.
- After transfer, those investments are no longer inside an ISA, unless the beneficiary chooses to use their own ISA allowance and the provider allows such a move.
The provider will usually need verified instructions from all executors, plus the Grant of Probate where applicable.
Practical steps for families and executors
If you are dealing with the estate of someone who had ISAs:
- Notify the ISA providers as soon as fairly possible, and ask for their bereavement teams’ contact details.
- Provide the death certificate and any forms they require.
- Wait for Probate if needed – larger estates or those holding shares typically need a Grant of Probate before funds can be released or investments transferred.
- Check for a spouse or civil partner and ensure they are aware of the APS rules.
- Keep clear records of valuations at the date of death for Inheritance Tax and estate accounts.
If you are a surviving spouse or civil partner:
- Ask each ISA provider for APS claim forms and deadlines.
- Decide whether you want to:
- Keep cash;
- Reinvest in cash ISAs;
- Invest in Stocks & Shares ISAs; or
- Use a mix, depending on risk and time horizon.
Taking financial advice can be helpful where larger sums or complex investments are involved.
Planning ahead: making ISAs part of your estate planning
Although ISAs do not escape Inheritance Tax, you can still plan sensibly:
- Make a valid will so your ISA savings pass to the people you intend.
- Be aware that a spouse or civil partner can inherit your allowance via APS, helping preserve tax efficiency for the family.
- For larger estates, consider speaking to a financial adviser or solicitor about:
- IHT‑efficient investments;
- Gifting strategies;
- Trusts, where appropriate.
Summary: key points to remember
- ISAs stop being normal ISAs when the holder dies, but may continue as “deceased ISAs” for up to three years while the estate is administered.
- During this continuing period, income and gains within the ISA remain tax-free.
- The value of ISAs is included in the estate for Inheritance Tax purposes.
- A surviving spouse or civil partner can receive an Additional Permitted Subscription (APS), giving them an extra ISA allowance equal to the deceased’s ISA value.
- Other beneficiaries can inherit the money or investments, but not the ISA wrapper itself.
- Executors are responsible for valuing the ISAs, declaring them for IHT and arranging distribution.
Understanding what happens to ISAs after death will not remove the sadness of losing someone, but it can make the administrative side a little clearer, and help families preserve more of their loved one’s hard‑earned savings.
