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What happens to an ISA on death?

What happens to ISA on death is that it ends when your nominated executor closes it or when the administration of your estate is finalised. If neither of these things happens, the providers of your ISA will close it three years and one day after you’ve passed.

Can my ISA be inherited by someone else?Unfortunately, ISAs cannot be directly inherited by anyone other than your spouse or civil partner.
Will my ISA lose its tax-free status upon my death?       No, an ISA will maintain its tax-free status during the administration of your estate.



Who can be a beneficiary of my ISA?A beneficiary of your ISA, including your spouse, civil partner, children, grandchildren, and other relatives.
What happens to my ISA when I die?Your ISA on death will turn into a continuing ISA.

ISAs are tax wrappers, so they are not subject to income or capital gains tax. However, the investments they contain will be counted as part of your estate and, depending on their value, could be subject to inheritance tax.

Understanding what happens to someone’s investments when they die is something every investor needs to know. That way, you can organise your financial planning in a tax-efficient manner to retain as much as possible, avoiding excessive taxation.

This Moneyfarm guide has been written to help you understand the rules of inheritance so you can secure your legacy in the most tax-efficient way.

What happens to my ISA on death?

Your ISA will be terminated after your death. If nobody does anything, your ISA or ISAs will be closed by your ISA providers. This happens automatically three years and one day after your date of death.

ISAs on death can be ended earlier by the executor named in your will or once the administration of your estate has been completed.

Are ISAs transferrable while you’re alive?

You cannot transfer an ISA to another person while you are alive. This is due to the fact that the tax benefits provided by ISAs are for a specific person, and they cannot be transferred or shared.

Should you want to move money from your ISA to someone else while you’re alive, the investments must first be sold and withdrawn. The money can then be passed on to another person, who can add it to their ISA if their remaining annual ISA allowance permits.

Are ISAs transferrable after your death?

No, not the ISA itself, but the contents it holds can be, but there are specific rules and regulations that govern the transferability of an ISA on death after the account holder has passed away.

How can you inherit an ISA on death of the holder?

The ISA inheritance rules are specific. You can inherit an ISA on the death of the holder if you are the surviving spouse or civil partner of the deceased ISA investor who passed away on or after 3 December 2014. Under this circumstance, an inheritable ISA can be transferred to you via what is called the Additional Permitted Subscription (APS).

The APS was introduced in 2015 and was equal to the monetary value of the ISA on death, or more specifically, on the date of your partner or spouse’s death. In other words, the surviving partner or spouse was entitled to a one-off additional ISA allowance equivalent to the value of the deceased’s ISA when they died, via an APS.

An APS is a one-off occurrence and has no effect on the recipient’s annual ISA allowance in the year it is received.

In 2018, the rules were changed in as much as if the date of death of the deceased was on or after 6 April 2018, an ISA on death would become what is termed a ‘continuing ISA’.

It meant that the value of the APS would be the equivalent of the value of the ISA:

  • On completion of the administration of the deceased’s estate
  • 3 years after the deceased date of death (does not apply to Junior ISAs).
  • Upon termination of the ISA, subsequent to the complete withdrawal of all funds.

Where the deceased owned several ISAs, an APS can be issued for each.

Are ISAs subject to inheritance tax?

What happens to my ISA when I die without a spouse or civil partner as a beneficiary? After you die, if your spouse or civil partner is not a beneficiary of your ISA on death, the monies will be added to the value of your estate and could be subject to inheritance tax.

Other inheritance ISA allowance rules?

For the avoidance of doubt, there is no such thing as an inheritance ISA. If and when used, this term relates to an APS.

Most types of ISAs can be inherited, and when researching the answers to the questions, “What happens to Stocks and Shares ISA on death?” and “What happens to my Cash ISA when I die?”, you will find that the only people who can inherit an ISA tax-free are the partners or spouses who are given an APS allowance.

Other ISA allowance rules that apply to an APS are:

  • A Stocks and Shares ISA APS has to be completed no later than 180 days after the assets have been distributed to the surviving partner/spouse.
  • A Cash ISA APS is available for up to three years after the deceased’s date of death or up to 180 days following the completion of the estate being wrapped up.

If you’re asking, “What happens to a cash ISA when someone dies,” or “What happens to my Lifetime ISA on death?” or “What happens to my Innovative Finance ISA on death, the answer in all instances is that they become part of the deceased’s estate, and if the estate totals more than £325,000, will be subject to inheritance tax at 40%.

What happens to ISAs on death when they are Junior ISAs is quite different. The funds in a Junior ISA upon the death of the child will be returned to the contributors.

If you’re passing assets on to direct descendants, which include your children and grandchildren, and the assets include your family residence, the tax-free threshold is increased by a further £175.000.

Is ISA probate necessary to inherit an ISA on death of the holder?

ISAs and probate are inexorably linked as regards an ISA on death of the holder. Probate is the term given to the process of dealing with someone’s estate after their death. If you are a beneficiary of an ISA left in a will, you must wait until the administration or ISA probate process has been completed.

In terms of Cash ISAs, some providers allow the funds to be transferred directly to the spouse or civil partner of the deceased without the need for probate if an application form for an APS is completed once the death has been recorded.

As regards a stocks and shares ISA on death, some providers might insist on a probate completion for the transfer of the assets, while others might permit them to be transferred directly to the spouse or civil partner without a probate completion.

Avoiding Inheritance Tax

When planning your long-term investment strategy, you should think about what happens to your ISA on death. Only your partner or spouse can inherit the money tax-free via an APS, which can be filed during the ISA probate process. Anybody else might have to pay inheritance tax depending on the value of your estate. The only ways this can be avoided are:

  • To make gifts. Everyone has a £3,000 per annum “annual exemption.”
  • Using the £175,000 property allowance when property is bequeathed to children and grandchildren.
  • Use Equity Release to free up money while you’re alive. However, don’t forget the annual exemption gift rule.
  • When you leave your ISA to a registered charity.

What about pensions?

If you’re asking yourself, “can I transfer my pension to another person?” the answer is no, not while you’re alive. If, however, you get divorced, you can apply for a PSO (Pension Sharing Order).

Let’s now look at what can be done with your private pension after you die.

Defined contribution pensions

Your private pension pot belongs to you as an individual. If you die before you reach 75, funds can usually be passed on to your partner, spouse or dependents tax-free. If your death occurs after you’re 75, the tax benefits no longer apply.

Defined benefit pensions

What happens to defined benefit pensions after the pension holder’s death can vary according to each specific scheme. Spouses or civil partners could be entitled to receive a reduced pension.


If you purchased an annuity and it had a guaranteed period, payments could continue to a designated beneficiary for the remaining term. Without such a guarantee, the payments will likely stop upon your death.

For more information about pensions, including the state pension after death, check out this article entitled “What happens to your pension when you die”.

I’ve received an inheritance – how should I invest it?

If you’ve received a significant inheritance via an ISA on death of the holder or via some other medium and you would like to make it work for you in the most beneficial way, the best thing to do is to seek professional investment advice.

Knowing how to invest your inheritance and take advantage of the tax benefits open to you is key. For example, you can optimise both your annual ISA and pension allowances and use the remaining balance to open a general investment account.

Finding out the answer to the question of “What happens to an ISA when someone dies, can help you with making decisions about what to do with any inheritance you, yourself, might receive. Forewarned is, as they say, forearmed.


Do ISAs have to go through probate?

Yes, completing the ISA probate process is the only way to pass on the contents of an ISA.

Can I change the beneficiary to my ISA account?          

You can definitely change your beneficiary at any time. Contact your ISA provider and provide them with the new beneficiary’s details. However, if you die and have not changed your beneficiary, the money in your ISA on death will be paid out to the beneficiary you had chosen when you opened the ISA.

What happens to my ISA on death if I haven’t made a will?

If you die and don’t have a will, the money in your ISA will be paid out to your estate according to the rules of intestacy. This means that the money will be distributed to your legal heirs or closest relatives.

​​What happens to the ISA if the inheritor is not a UK resident?  

If the inheritor is not a UK resident, they may lose the tax advantages of the ISA. The money in the ISA will be paid out to them free of tax. However, the inheritor may have to pay tax in their own country on the money they receive. It’s advisable to seek professional advice in such circumstances.

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*Capital at risk. Tax treatment depends on your individual circumstances and may be subject to change in the future.