What Happens to My ISA When I Die? (UK Rules 2026/27)

When a UK ISA holder dies, the ISA wrapper continues for up to three years (or until the estate is administered if sooner) — interest, dividends and gains during this period remain tax-free. The deceased’s surviving spouse or civil partner inherits an Additional Permitted Subscription (APS) allowance equal to the higher of the ISA’s value at death or at the date of transfer. The underlying funds pass according to the will or intestacy rules and may be subject to Inheritance Tax (40% above the nil-rate band of £325,000).

This is the post-death framework, for the 2026/27 tax year.

The 3-year continuing ISA wrapper

A 2018 change (the “continuing ISA” rules) introduced tax-free protection on the ISA for a limited period after death:

• From the date of death, the ISA continues as a tax-free wrapper.
• This lasts until 3 years after death, OR
• Until the estate is finalised (probate granted and assets distributed), whichever is earlier.

During this period:

• Interest, dividends and capital gains inside the ISA remain UK tax-free.
• No further contributions can be made by anyone (the deceased can’t, the estate can’t, beneficiaries can’t).
• The provider continues to hold the funds in the ISA structure until the estate’s executor instructs them.

The continuing ISA was a meaningful improvement on the previous rules, which closed the wrapper immediately at death and exposed the assets to tax during what could be a lengthy probate process.

The APS — Additional Permitted Subscription for spouses

When the deceased was married or in a civil partnership at the time of death, the surviving spouse / civil partner gets a special one-time additional ISA allowance: the Additional Permitted Subscription (APS).

How it works:

• The APS is equal to the value of the deceased’s ISA at the higher of: date of death, or the date assets transfer to the spouse.
• This is in addition to the spouse’s own £20,000 annual allowance.
• The APS can be used over a window of typically 3 years from death (or 180 days from completion of probate, if later) for cash and stocks & shares ISAs.
• The spouse must be married or in a civil partnership at the time of death.
• The spouse must be UK resident to use the APS (general ISA eligibility rules).

This means a surviving spouse can effectively keep the family’s ISA wealth inside ISA wrappers, even though the technical transfer leaves the wrapper for a moment.

A worked example:

• Sam dies with £150,000 in ISAs. His wife Maria is the sole beneficiary.
• Maria gets her usual £20,000 ISA allowance for the 2026/27 tax year.
• Maria also gets an APS of £150,000 (the value of Sam’s ISA at his death).
• Over the next 3 years, Maria can put £150,000 into her own ISAs over and above the £20,000 annual allowance.
• The £150,000 effectively returns to a tax-free wrapper in her hands.

What if there’s no surviving spouse?

If the deceased was single, divorced, or the beneficiary is not the spouse / civil partner:

• The ISA wrapper closes when the estate is finalised (still up to 3 years post-death).
• The funds pass under the will or intestacy to the beneficiaries.
• The beneficiaries hold the assets as normal taxable investments going forward — they don’t inherit the ISA wrapper.
• The APS does not apply.

So if you leave £100,000 in an ISA to your adult children, they receive £100,000 of cash (or investments transferred out of the ISA) which they then hold as ordinary taxable assets. No special inheritance allowance.

What about Inheritance Tax?

ISAs are not exempt from Inheritance Tax. The full ISA value forms part of your estate at death.

The IHT framework for 2026/27:

• Nil-rate band: £325,000 per person.
• Residence nil-rate band: up to £175,000 when a main home passes to direct descendants.
• Spouse exemption: assets passing to a UK-domiciled spouse / civil partner are 100% IHT-free.
• 40% IHT above the available nil-rate bands.

A worked IHT scenario:

• Tom dies with a total estate of £600,000, including £100,000 in ISAs and £500,000 of other assets.
• He’s widowed; spouse died years before, so her unused nil-rate band transfers to his estate. Combined nil-rate band: £650,000.
• His estate is below the combined nil-rate band — no IHT.
• The £100,000 ISA passes to his children, who receive it as a £100,000 lump sum (no further wrapper since he wasn’t married at death).

A different scenario:

• David dies with a £900,000 estate including £200,000 in ISAs.
• Single, never married. Single nil-rate band of £325,000 only.
• Estate above nil-rate band: £900,000 − £325,000 = £575,000. (Residence nil-rate band may apply if main home passes to direct descendants.)
• IHT at 40% on £575,000 ≈ £230,000.
• ISA forms part of the taxable estate.

What about pensions vs ISAs at death?

A common comparison: pensions are usually outside the estate for IHT, while ISAs are inside the estate. This is one of the reasons many planners suggest:

• Use the pension as a primary tax-efficient wrapper, especially for funds you don’t need to access before age 60.
• Use the ISA for funds you need access to, including before pension age.
• For higher-income earners with large estates, pension may be more efficient for inheritance planning than ISA.

A potential change to watch: there’s been ongoing political discussion about whether pensions should be brought into IHT. As of 2026/27, defined contribution pensions remain largely outside IHT (within certain age and lump sum limits). [VERIFY: confirm current pension IHT treatment, particularly any 2024 budget changes.]

The practical sequence after death

If you’re executor of an estate that includes ISAs:

1. Notify the ISA provider of the death — usually requires a death certificate copy.
2. Provider freezes the ISA but it continues to grow tax-free.
3. Apply for probate if needed (estates above £5,000 typically need probate).
4. Receive probate grant.
5. Instruct the provider how to distribute the ISA — typically to the executor’s solicitor or directly to beneficiaries per the will.
6. For a spouse beneficiary: apply for the APS within the relevant window (3 years from death or 180 days from probate, whichever is later).
7. Pay IHT to HMRC within 6 months of death (interest accrues thereafter).
8. Submit the IHT return (IHT400 in most cases) within 12 months of death.

What if I’m the spouse — can I just keep the deceased’s ISA?

Not directly. The ISA wrapper is personal — it has the deceased’s NI number on it. The proper sequence:

1. Inherit the funds (or assets) from the deceased’s ISA.
2. The funds come into your own bank account / wealth.
3. Use the APS to put them back into ISA wrappers (this can be done with the deceased’s provider or any other ISA provider — your choice).

The continuity for the spouse is via the APS allowance, not via direct transfer of the ISA wrapper. Most major UK ISA providers offer streamlined APS processes — they can transfer the funds into a new APS-tagged ISA in your name.

Internal links

• Can I inherit my spouse ISA allowance?
• How many ISAs can I have at once?
• Is a Junior ISA worth it?

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This guide is information, not regulated financial advice. Inheritance, estate and ISA rules can interact in complex ways — speak to a qualified UK probate solicitor or tax adviser when dealing with a specific estate.