Inheriting an ISA

Inheriting an ISA from a parent

If you inherit an ISA from a parent, friend or any other relative, excluding a spouse or civil partner, the account will be closed. The money becomes part of the deceased’s estate and is usually paid out in cash once their finances have been settled. Depending on the value of the estate, you may need to pay Inheritance Tax (IHT). 

How tax might affect what you inherit

If you inherit money that was held in an ISA, here are a few things to know:

• the ISA’s tax-free status ends when the account holder dies;
• if the estate (including the ISA) is worth more than £325,000 then *IHT may apply at a rate of 40%;
• you won’t pay Income Tax or capital gains tax (CGT) on the amount you inherit, but any growth in the ISA’s value before the estate is settled might be taxable; and
• to keep your inherited funds growing tax-free, you’d need to move them into your own ISA. This will count towards your annual ISA allowance of £20,000 (2025/26).

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*The rules around IHT are complex. Find out more about IHT thresholds and exemptions.

Inheriting an ISA from a spouse

If your spouse or civil partner passes away, you won’t inherit their ISA account directly. But you may be able to retain the tax benefits through an Additional Permitted Subscription (APS).

An APS is a one-off allowance equal to the value of their ISA at the time of death. It lets you pay that amount into your own ISA without affecting your usual annual limit of £20,000 (2025/26).

You’ll normally apply for an APS through the deceased’s ISA provider. Some providers allow you to transfer the APS to another provider, but both providers must agree to the transfer.

How much is the APS allowance?

The value of your APS allowance depends on when your spouse or civil partner died. If they passed away on or after 6 April 2018, you have two options:

• you can use the ISA’s value on the date of death; or
• you can choose the value at the earliest of the date the ISA is closed, the date the estate is settled or the third anniversary of the death.

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This second option can sometimes give you a larger APS allowance, as the ISA may continue to grow in value for up to three years after death.

If they died on or before 5 April 2018, the APS allowance is based on the value of their ISA at the time they passed away.

How the APS allowance works in practice

If your spouse or civil partner’s ISA was worth £45,000, you’d be able to add that amount into your own ISA using the APS allowance. Combined with your usual £20,000 limit, you could save up to £65,000 tax-free per tax year.