What happens to your ISA when you die?

What happens to an ISA when someone dies?

An ISA does not simply close on the day someone dies. gov.uk describes it as becoming a “continuing account of a deceased investor”. While it holds that status, the money and investments inside it keep earning interest, dividends or growth completely free of Income Tax and Capital Gains Tax, exactly as before.

That status lasts until the earliest of three things happens: the executor closes the account, the administration of the estate is completed, or three years and one day after the date of death. If neither of the first two has happened by then, the provider closes the ISA automatically at that point.

None of this affects Inheritance Tax. The ISA’s contents count as part of the estate from the date of death, regardless of how long the tax-free wrapper itself continues afterwards.

No new money can be paid into the ISA once the account holder has died, not even under a flexible ISA’s usual right to replace a withdrawal. The investments already inside it can still be actively managed, for example switched between funds, while the account remains open.

Can you transfer an ISA when someone dies?

Not to a different provider, in the ordinary sense. Personal representatives cannot ask for a continuing account of a deceased investor to be moved to another ISA manager. The account stays with whichever provider held it until it is closed. This is different from transferring a living ISA between providers; see our guide to ISA transfers for how that works day to day.

There is one specific exception, and it applies only to Stocks and Shares ISAs. The provider can be instructed to transfer the investments directly into a surviving spouse’s or civil partner’s own ISA, rather than selling them first, but only if the survivor holds their ISA with the same provider. Otherwise, the provider sells the investments and pays the proceeds to the administrator or beneficiary of the estate.

This is separate from inheriting the deceased’s ISA allowance, which is covered next. Check the terms and conditions of the specific Stocks and Shares ISA for how a provider handles this in practice, since the choice between selling and transferring sits with them.

What is the ISA allowance for a surviving spouse or civil partner?

A husband, wife or civil partner does not just inherit the money in an ISA. They can also inherit an extra tax-free ISA allowance of their own, called the additional permitted subscription, or APS.

To qualify, the survivor and the person who died must have been living together at the date of death: not separated under a court order, a deed of separation, or because the marriage or civil partnership had broken down.

The APS allowance is based on the value of the deceased’s ISA, either at the date of death or at the point the account stopped being a continuing account of a deceased investor, broadly when it closes, whichever figure is higher. It sits on top of the survivor’s own annual ISA allowance and does not reduce it, with one exception: APS money paid into a Lifetime ISA counts towards that Lifetime ISA’s own £4,000 yearly limit.

For example, say someone’s ISAs were worth £60,000 when they died, and had grown to £62,000 by the time the account closed eighteen months later. Their spouse could claim an APS allowance of £62,000, the higher of the two figures, on top of their own ISA allowance for that year.

Cash subscriptions must be made within 3 years of the date of death, or, if the estate takes longer to administer, within 180 days of that administration finishing. Transferring the actual inherited investments across without selling them, known as an “in specie” subscription, has a tighter 180 day window from the date they become the survivor’s, and is only available if the APS is made with the same manager that held the deceased’s ISA.

ISA rules on death, at a glance

Tax-free status continues

Up to 3 years

Or sooner, once the estate is settled or the ISA is closed

Who can inherit the allowance

Spouse or civil partner

Through the additional permitted subscription

Deadline for a cash APS

3 years from death

Or 180 days after administration completes, if later

Inheritance Tax on money left to a spouse

None

The normal spouse and civil partner exemption applies

Does an ISA count for Inheritance Tax?

Yes. An ISA’s tax advantages cover Income Tax and Capital Gains Tax only. For Inheritance Tax, it is treated the same as any other asset in the estate.

Ordinarily, there is no Inheritance Tax to pay if the estate is worth less than £325,000, or if everything above that threshold goes to a spouse, civil partner, a charity or a community amateur sports club. Anything left to a spouse or civil partner, ISA or otherwise, is exempt regardless of the amount. Above the threshold, the standard rate is 40%, charged only on the part of the estate that exceeds it.

Children and other beneficiaries do not pay tax personally on what they inherit. Inheritance Tax is worked out on the whole estate and paid out of it, usually by the executor, before what remains is distributed. An ISA left to a child, alongside other assets, can indirectly contribute to a tax bill paid by the estate even though the child does not receive a bill of their own.

What happens to a Lifetime ISA when the investor dies?

A Lifetime ISA follows the same continuing account rules as other ISAs, but death is also one of the specific reasons a withdrawal is charge-free. gov.uk is direct about this: if you die, your Lifetime ISA ends on the date of death, and there is no charge to withdraw the funds or assets from it. The usual 25% charge for taking money out early simply does not apply. Our guide to the Lifetime ISA withdrawal charge covers how that charge works in every other situation.

Any government bonus due on payments made on or before the date of death can still be claimed, though the estate only receives it once the account is closed. Bonuses linked to payments made after the death, which can happen before a provider is told, have to be withdrawn and repaid, but without a charge if the provider genuinely did not know at the time.

What happens to a Junior ISA if a child dies?

If a child dies, the money in their Junior ISA or ISAs goes to whoever inherits their estate. In practice that is usually a parent, though it could be a spouse or partner if the child was over 16 and married or in a civil partnership.

There is no need to contact HMRC. You do need to tell the account provider, so they can close the Junior ISA, and they may ask for proof such as a copy of the death certificate.

What do executors typically need to do?

Tell the ISA provider as soon as possible, and expect to be asked for a copy of the death certificate. From there, most of the process sits with the provider rather than HMRC.

Providers vary in exactly what they need before releasing an ISA’s contents, including how they handle smaller estates that may not need a full grant of probate. gov.uk does not publish a single threshold for this, so it is worth asking the provider directly rather than assuming a figure applies.

None of this is personal advice. For free, impartial guidance on dealing with money after a death, MoneyHelper is a reasonable starting point, alongside a solicitor if the estate is more complex. If you are weighing up how ISAs compare with other tax-free wrappers for later life, see our comparison of ISAs and pensions. And if the person who died had already left the UK, our guide to ISAs if you move abroad covers how residence affects an ISA while someone is alive.