Skip to main content
WUHLD
← Back to articles

Can You Put an ISA in a Will? UK Inheritance Rules Explained

· 30 min

Note: The following scenario is fictional and used for illustration.

Emma, 52, spent 15 years building her ISA portfolio to £68,000—carefully maximizing her annual allowance and watching her stocks and shares ISA grow tax-free. When she died unexpectedly, her husband Mark assumed he could simply inherit her ISA accounts intact, preserving their tax-free status.

He was shocked to discover that ISAs don't transfer automatically like he thought. What Mark didn't know: he was entitled to an Additional Permitted Subscription (APS) worth £68,000—a one-off allowance on top of his own £20,000 annual ISA limit—but only if he claimed it within three years. Without a clear will specifying her ISA beneficiaries and understanding the inheritance rules, Mark nearly missed out on this valuable tax benefit.

Around 15 million UK adults held ISA accounts in 2023-24, with an average market value of £34,044. Yet most ISA holders don't understand what happens to their tax-free savings when they die. This guide explains exactly how ISAs are inherited in the UK, what Additional Permitted Subscriptions mean for spouses, and how to include your ISA in your will to protect your beneficiaries.

Table of Contents

Understanding ISAs and Inheritance in the UK

Individual Savings Accounts (ISAs) are one of the UK's most popular tax-efficient savings vehicles. The current ISA allowance is £20,000 for the 2025-26 tax year, and this limit will remain frozen until April 2031.

There are four main types of ISAs available to UK savers:

  • Cash ISAs: Traditional savings accounts with tax-free interest
  • Stocks and Shares ISAs: Investment accounts holding shares, funds, and bonds with tax-free growth
  • Innovative Finance ISAs: Peer-to-peer lending and crowdfunding investments
  • Lifetime ISAs: Designed for first-time buyers (under 40) and retirement savings (age 60+)

At the end of 2022-23, 39.4% of adults in England had an ISA. With the average ISA market value sitting at £34,044, these accounts represent substantial assets that deserve careful estate planning.

Here's what many ISA holders don't realize: ISAs are personal savings accounts that don't automatically transfer to anyone when you die. They become part of your estate and must be distributed according to your will—or under intestacy rules if you don't have one.

David, 45, has £42,000 in his Cash ISA and £31,000 in his Stocks and Shares ISA. He assumes these accounts will automatically transfer to his wife if something happens to him. This misconception is common—ISAs are part of your estate and distributed according to your will, just like your other assets. Without a clear will, David's ISAs could be subject to intestacy rules, potentially delaying distribution and causing confusion for his family.

What Happens to Your ISA When You Die?

When you die, your ISA doesn't simply close immediately. Instead, it becomes what's known as a "continuing ISA" or "continuing account of a deceased investor."

Under government ISA inheritance rules, your ISA remains open for up to 3 years and 1 day after your death. During this continuing ISA period, the account retains its valuable tax benefits—no income tax or capital gains tax on growth or income.

However, there's a critical limitation: no new contributions can be made to a continuing ISA. The account is essentially frozen in terms of deposits, but existing investments can continue to grow tax-free while your estate is being administered.

After the 3 years and 1 day period expires, your ISA provider must close the account. The ISA value forms part of your estate and must go through probate before distribution to beneficiaries. This means the value is assessed at the date of death for probate purposes, though the actual value may fluctuate before your beneficiaries receive the funds—particularly for Stocks and Shares ISAs where investment values change daily.

Sarah died in January 2025 with a Stocks and Shares ISA worth £55,000. Her ISA became a continuing ISA, preserving tax-free status on dividends and capital gains while her estate was administered. Her executor distributed the ISA proceeds to her named beneficiaries in May 2025, but the account formally remained open as a continuing ISA until January 2028 (3 years and 1 day).

This continuing account structure provides important flexibility during estate administration, allowing investments to continue growing tax-free rather than forcing immediate liquidation.

Can You Name an ISA Beneficiary in Your Will?

Yes, you can name anyone you like as your ISA beneficiary in your will. When you die, the value of your ISA passes to the beneficiaries you've specified as part of your estate distribution.

Unlike pensions, ISAs don't have separate beneficiary nomination forms. Your ISA beneficiaries are determined entirely by your will. If you die without a will (intestacy), your ISA distribution follows intestacy rules—your spouse receives the first £322,000 plus 50% of the remainder, and if you have no spouse, your children inherit equally.

You have complete flexibility in naming ISA beneficiaries. You can leave your ISA savings to:

  • Your spouse or civil partner
  • Your children or grandchildren
  • Other relatives (siblings, parents, nieces, nephews)
  • Friends
  • Charities

If you have multiple ISA accounts, you can name specific beneficiaries for specific ISAs, or include all ISAs in your residuary estate clause for simpler administration.

Important distinction: Just naming someone in your will doesn't automatically preserve the ISA tax benefits for them. Whether your beneficiaries receive special tax treatment depends on who they are, as shown in this comparison:

Beneficiary Type Can Inherit ISA Value? Gets Tax-Free Transfer? Receives APS Allowance? Inheritance Tax Applies?
Spouse/Civil Partner Yes Yes (spousal exemption) Yes No
Children Yes No (taxable as part of estate) No Yes (if estate exceeds £325,000)
Other Relatives Yes No No Yes (if estate exceeds £325,000)
Friends Yes No No Yes (if estate exceeds £325,000)
Charities Yes Yes (charity exemption) No No

James named his three adult children as equal beneficiaries in his will. His £60,000 ISA was divided equally (£20,000 each). However, none of his children received an Additional Permitted Subscription allowance because APS is only available to surviving spouses and civil partners. The ISA value was subject to inheritance tax as part of his £400,000 estate.

How Spouses Inherit ISAs: Additional Permitted Subscription Explained

The Additional Permitted Subscription (APS) is the most valuable ISA inheritance benefit available—yet it's also the least understood. If you're married or in a civil partnership, your spouse receives special treatment when inheriting your ISA that can preserve tens of thousands of pounds in tax-free savings.

What is APS?

An Additional Permitted Subscription is a one-off ISA allowance given to surviving spouses or civil partners when an ISA holder dies. The APS amount equals the value of ALL the deceased's ISAs combined—across all ISA types.

Crucially, the APS is measured at either the date of death OR the date of account closure—whichever is higher. This protects surviving spouses from investment losses during probate.

The APS is in addition to the surviving spouse's normal £20,000 annual ISA allowance. For example, if your deceased spouse had £50,000 in ISAs, the survivor can contribute up to £70,000 to ISAs that tax year (£50,000 APS + £20,000 normal allowance).

Who Qualifies for APS?

To receive an APS allowance, you must meet these criteria:

  • You must have been legally married or in a civil partnership at the date of death
  • You must have been living together (not separated under court order, deed of separation, or where the relationship had broken down)
  • The death must have occurred on or after 3 December 2014 (when these rules came into effect)

These eligibility requirements ensure that only genuine spouses and civil partners—not separated or estranged couples—can claim the APS benefit.

Time Limits for Claiming APS

You have a generous but finite window to use your APS allowance:

  • Cash subscriptions: 3 years from the date of death OR 180 days after estate administration completes—whichever is later
  • In specie transfers (transferring investments directly): 180 days from when beneficial ownership passes to you

This is a one-time allowance, not a recurring annual benefit. Once the deadline passes, any unused APS allowance is lost permanently.

How to Claim Your APS

Claiming your APS is straightforward, with important flexibility:

  • You can invest your APS with the same ISA provider as your deceased spouse OR with a different provider of your choice
  • You're not required to invest the actual inherited cash—you can use other money up to the APS limit
  • If you choose to invest your APS with a specific provider, the entire APS amount for that ISA type must go to that provider (you can't split it between multiple providers)
  • Note that providers are not obliged to accept APS subscriptions, so check their terms

When Rachel's husband died in March 2024, he had £45,000 in a Cash ISA and £38,000 in a Stocks and Shares ISA (total £83,000). Rachel received an APS allowance of £83,000 in addition to her standard £20,000 ISA allowance for 2024-25. She had until March 2027 (3 years) to use this allowance. She invested £50,000 of the APS into her existing Stocks and Shares ISA in July 2024, preserving the tax-free status of those funds. She still has £33,000 of unused APS allowance available until the deadline.

ISA Inheritance Tax Rules for Non-Spouse Beneficiaries

When ISAs pass to children, other relatives, or non-spouse beneficiaries, different tax rules apply. Understanding these rules is essential for estate planning if you're leaving ISAs to anyone other than your spouse or civil partner.

ISAs ARE Subject to Inheritance Tax

Unlike the tax-free treatment they receive during your lifetime (no income tax or capital gains tax), ISAs are subject to Inheritance Tax when they form part of your estate. The ISA value counts toward your total estate value for IHT calculation.

The standard nil rate band is £325,000, frozen until at least April 2028. If you leave your home to direct descendants (children, grandchildren, stepchildren), you may qualify for an additional residence nil rate band of £175,000, creating a combined threshold of up to £500,000.

The standard IHT rate is 40% on everything above your nil rate band.

How Non-Spouse Beneficiaries Receive ISA Inheritances

When your children or other beneficiaries inherit your ISA, they receive only the value of the ISA—not the tax-free wrapper itself. This means:

  • Beneficiaries receive the cash or investments as part of the estate distribution
  • They can invest the inherited money in their own ISA, but only up to their own annual allowance (£20,000)
  • They receive no special ISA allowance like the APS available to spouses
  • The ISA value loses its tax-free status once distributed

Example IHT Calculations

Example 1: Estate below threshold

  • Estate value: £280,000 (including £55,000 ISA)
  • IHT due: £0 (below £325,000 threshold)
  • Beneficiary receives full ISA value

Example 2: Estate above threshold

  • Estate value: £450,000 (including £80,000 ISA)
  • Taxable amount: £450,000 - £325,000 = £125,000
  • IHT due: £125,000 × 40% = £50,000
  • Net estate to beneficiaries: £400,000

Example 3: Estate with residence nil rate band

  • Estate value: £520,000 (including £70,000 ISA + £300,000 home left to children)
  • Combined threshold: £325,000 + £175,000 = £500,000
  • Taxable amount: £520,000 - £500,000 = £20,000
  • IHT due: £20,000 × 40% = £8,000

IHT Planning Strategies

While you can't avoid IHT entirely for non-spouse beneficiaries, consider these approaches:

  • Charitable donations: Donating 10% or more of your estate to charity reduces the IHT rate from 40% to 36%
  • Lifetime gifting: Gifts made 7+ years before death are IHT-free (though you lose the ISA wrapper immediately upon withdrawal)
  • Residence nil rate band: Ensure you qualify by leaving your home to direct descendants

Claire left her £65,000 ISA to her daughter Emily in her will. Claire's total estate was £380,000. After deducting the £325,000 nil rate band, £55,000 was subject to 40% IHT (£22,000 tax bill). Emily received the ISA proceeds after IHT was paid by the estate, but couldn't preserve the tax-free wrapper—she could only invest up to £20,000 in her own ISA using her annual allowance.

Different Types of ISAs and How They're Inherited

The inheritance process varies slightly depending on which type of ISA you hold. Understanding these differences helps with estate planning and ensures your executor knows what to expect.

Cash ISAs

Cash ISAs are the most straightforward to inherit. The value is relatively fixed at the date of death, though interest may continue to accrue during the continuing ISA period while your estate is administered.

For spouses, the APS allowance is calculated at death or account closure (whichever is higher). The surviving spouse can transfer the cash to their own Cash ISA to preserve the APS allowance, maintaining the full tax-free benefit.

Non-spouse beneficiaries receive the cash value as part of estate distribution, subject to normal inheritance tax rules if the estate exceeds the nil rate band.

Stocks and Shares ISAs

Stocks and Shares ISAs introduce additional complexity because their value can fluctuate between the date of death and distribution to beneficiaries. During the continuing ISA period (up to 3 years and 1 day), capital gains remain tax-free.

Your executor has two options: keep the investments during probate or sell them. If your spouse inherits and uses the same ISA provider, they can transfer the investments directly to their own Stocks and Shares ISA without selling (known as an "in specie" transfer).

If the ISA goes to a different provider or to a non-spouse beneficiary, the investments typically must be sold and the proceeds distributed.

The APS allowance for spouses is calculated using the higher value—either at death or at account closure—protecting them from market downturns during probate.

Lifetime ISAs (LISAs)

Lifetime ISAs are designed for first-time buyers (who can open them up to age 40) and retirement savings (accessible without penalty from age 60).

When a LISA holder dies, the spouse or civil partner receives an APS equal to the LISA value including the government bonus. However, this APS doesn't retain the Lifetime ISA wrapper—it becomes a standard ISA allowance that can be used in any ISA type.

Importantly, no government withdrawal charge applies to the spouse's APS, unlike early withdrawals during the account holder's lifetime.

In 2024-25, 87,250 LISA holders withdrew funds to purchase their first home, with an average withdrawal value of £15,782. This demonstrates how valuable these accounts can be for young couples and families.

Innovative Finance ISAs

Innovative Finance ISAs hold peer-to-peer loans and crowdfunding investments. These can be more complex to inherit because the underlying assets may be illiquid—you can't easily sell peer-to-peer loans before they mature.

Your executor may need to wait for loan repayments before distributing the ISA proceeds to beneficiaries. There's also a risk that underlying loans may default during the probate period, reducing the value available to beneficiaries.

The APS rules for spouses apply the same way as for other ISAs, though the practical challenge of transferring illiquid investments can complicate the process.

Junior ISAs (JISAs)

Junior ISAs have a unique characteristic: they belong to the child, not the parent who opened them. This means a JISA is not part of the parent's estate if the parent dies—it remains the child's asset.

If the child dies before age 18, the JISA becomes part of the child's estate and typically passes to parents under intestacy rules if the child was unmarried.

Parent contributions to a JISA are considered gifts and are IHT-free if the parent survives 7 years after making the contribution. In 2023-24, 1.37 million Junior ISA accounts were subscribed to.

ISA Type Comparison

ISA Type Spouse APS? Can Transfer Investments? Special Rules
Cash ISA Yes Yes (if same provider) Simplest to inherit
Stocks and Shares ISA Yes Yes (if same provider) Value fluctuates; may need to sell
Lifetime ISA Yes (including bonus) Yes APS loses LISA wrapper; no withdrawal charge
Innovative Finance ISA Yes Maybe (if loans transferable) May be illiquid; wait for repayments
Junior ISA N/A (child's asset) N/A Not part of parent's estate

Oliver had three ISAs when he died: £28,000 Cash ISA, £41,000 Stocks and Shares ISA, and £12,000 Lifetime ISA (including £3,000 government bonus). His wife received a total APS allowance of £81,000 (all three ISAs combined). She transferred the Cash ISA to her existing Cash ISA with the same provider. The Stocks and Shares ISA was with a different provider, so the investments were sold and she used £41,000 of her APS to invest in her own S&S ISA. The Lifetime ISA APS (£12,000) could be used in any ISA type—she chose to add it to her Stocks and Shares ISA.

Do ISAs Go Through Probate?

Yes, ISAs must go through probate because they form part of the deceased's estate. This is an important distinction from some other financial products that can pass outside of probate.

The ISA is valued at the date of death for probate purposes, though the actual value distributed to beneficiaries may differ due to investment fluctuations—particularly for Stocks and Shares ISAs. Both Cash ISAs and Stocks and Shares ISAs require probate authorization before funds can be distributed.

Probate Valuation Requirements

Your ISA must be reported on the correct Inheritance Tax forms according to HMRC guidance:

  • Shares in ISA: Include on form IHT411
  • Foreign shares in ISA: Include on form IHT417
  • Cash in ISA: Declare on IHT400 or IHT100
  • Insurance policies in ISA: Declare separately on IHT400/IHT100

This detailed reporting ensures HMRC can properly calculate any inheritance tax due on your estate.

Executor Responsibilities

If you're named as an executor for someone with ISAs, your responsibilities include:

  1. Notify the ISA provider of the death (provide death certificate)
  2. Request valuation at the date of death for probate purposes
  3. Maintain the ISA as a continuing account during probate (up to 3 years)
  4. Decide on investments: For Stocks and Shares ISAs, determine whether to keep or sell investments
  5. Complete IHT forms accurately with proper ISA valuations
  6. Distribute proceeds to beneficiaries according to the will
  7. Inform surviving spouse of APS entitlement and deadlines if applicable

Probate Timeline

Typical probate takes 6-12 months for straightforward estates, though complex cases can take longer. The ISA can remain as a continuing account during this entire period, with investments continuing to grow tax-free.

Importantly, the spouse's APS clock starts from the date of death—not the date probate is granted. This means the 3-year deadline begins immediately, regardless of how long probate takes.

When Margaret died, her executor (her son Tom) had to apply for probate before accessing her £52,000 Stocks and Shares ISA. He notified the ISA provider, who valued the portfolio at death. Tom kept the ISA as a continuing account for 8 months during probate, allowing the investments to continue growing tax-free. Once probate was granted, he distributed the proceeds to Margaret's three beneficiaries as specified in her will.

How to Include Your ISA in Your Will

Including your ISA in your will ensures your tax-efficient savings go to your chosen beneficiaries. Follow these steps to properly document your ISA provisions.

Step 1: List Your ISAs

Start by documenting all your ISA accounts:

  • Provider name
  • Account number
  • ISA type (Cash, Stocks and Shares, Lifetime ISA, Innovative Finance)
  • Approximate current value

Include this information in your asset inventory alongside other financial accounts. Update this list regularly as ISA values change and if you switch providers or open new accounts.

Step 2: Decide on Beneficiaries

Consider your spouse or civil partner first if you're married or in a civil partnership—they receive the valuable APS benefit that preserves the tax-free status of your ISA savings.

If you have no spouse or want to leave ISAs to others alongside your spouse, decide between children, other relatives, friends, or charities. You can split ISAs between multiple beneficiaries or leave everything to one person.

You also have the option to leave specific ISAs to specific people (for example, your Stocks and Shares ISA to your daughter and your Cash ISA to your son), though this requires more detailed will provisions.

Step 3: Use Clear Language in Your Will

You have three main approaches for including ISAs in your will:

Option A: Include ISAs in residuary estate (Recommended for most people)

"I leave my entire residuary estate (including all bank accounts, savings accounts, ISAs, and investments) to my wife [Name]."

This is the simplest approach—all assets including ISAs go to your residuary beneficiary without needing to specify individual accounts.

Option B: Specify ISAs separately

"I leave my Cash ISA with [Provider Name] (account number XXXXX) and my Stocks and Shares ISA with [Provider Name] (account number XXXXX) to my husband [Name]."

This is more specific but requires updating your will whenever you change ISA providers or open new accounts.

Option C: Category-based bequest

"I leave all my savings and investment accounts (including all ISAs, bank accounts, and investment portfolios) to my children in equal shares."

This provides a balance between specificity and flexibility, grouping similar assets together.

For most people, Option A (residuary estate clause) is best for simplicity and future-proofing. Only use specific ISA provisions if you want different beneficiaries for your ISAs versus your other assets.

Step 4: Consider Including APS Information

While not legally required, consider including a letter of wishes that explains APS to your surviving spouse. This isn't legally binding but helps your executor know to inform your spouse of their valuable APS entitlement.

Example letter of wishes clause: "I wish to inform my executors that my spouse is entitled to an Additional Permitted Subscription allowance equal to my ISA values. Please ensure they are informed of this benefit and the deadline to claim within 3 years of death or 180 days after estate administration completes."

Step 5: Name an Executor Who Understands Finances

Choose an executor capable of managing ISA valuations, understanding probate requirements, and communicating with ISA providers. Your executor should understand APS rules if your spouse is a beneficiary, or be willing to seek professional guidance.

For complex estates with large ISA holdings (£100,000+) or multiple ISA types, consider appointing a professional executor such as a solicitor or specialist probate service.

What NOT to Do

  • Don't assume ISAs automatically go to your spouse—they don't transfer without a will
  • Don't rely on intestacy rules, which could split your ISAs unintentionally if your estate exceeds the spouse's threshold (£322,000 + 50% of remainder)
  • Don't forget to update your will if you open new ISAs or close existing accounts
  • Don't use outdated account numbers in your will (use provider name and account type instead for flexibility)

Hannah updated her will to include: "I leave my entire residuary estate, including all bank accounts, ISAs, investments, and personal possessions, to my husband Robert." This simple clause ensured Robert inherited all her ISAs (Cash ISA worth £22,000 and Stocks and Shares ISA worth £38,000) and received the full £60,000 APS allowance. She also left a letter of wishes reminding her executor to inform Robert of his APS entitlement and the 3-year deadline.

Common Mistakes with ISA Inheritance Planning

Understanding common errors helps you avoid costly mistakes when planning for ISA inheritance.

Mistake 1: Assuming Spouses Automatically Inherit ISAs

Many people believe that ISAs transfer automatically to their spouse like jointly held bank accounts. This is wrong—ISAs are distributed according to your will or, if you don't have a will, according to intestacy rules.

Without a clear will naming your spouse as beneficiary, your ISAs could be distributed in ways you didn't intend. Your executor might also not realize that your spouse is entitled to claim an APS allowance, causing them to miss the valuable tax benefit.

The correct approach is to name your spouse explicitly in your will and ensure your executor understands their responsibility to inform the spouse about APS entitlement and deadlines.

Mistake 2: Not Claiming APS Within the Deadline

This is perhaps the most financially damaging mistake. Many surviving spouses are simply unaware of their APS entitlement or the 3-year deadline, resulting in the permanent loss of allowances worth tens of thousands of pounds.

Your executor should inform your spouse immediately about their APS entitlement. The spouse should then claim the APS within 3 years of death or 180 days after estate administration completes (whichever is later). Missing this deadline means losing the allowance permanently.

Mistake 3: Thinking Children Inherit ISAs Tax-Free Like Spouses

Only spouses and civil partners receive the spousal exemption from Inheritance Tax and the Additional Permitted Subscription allowance. Children and other beneficiaries face IHT if your total estate exceeds £325,000 (or up to £500,000 if you qualify for the residence nil rate band by leaving your home to direct descendants).

Understand the IHT implications when leaving ISAs to children. Consider using your residence nil rate band if you own your home and are leaving it to direct descendants, potentially increasing your tax-free threshold to £500,000.

The consequence of not understanding this: unexpected 40% tax bills on the portion of your estate above the threshold.

Mistake 4: Forgetting to Update Your Will After Opening New ISAs

If you draft your will before opening ISAs, or open new ISAs after creating your will, those accounts might not be clearly covered by your will provisions. While they'll likely fall into your residuary estate clause, it's better to review and confirm this explicitly.

Review and update your will every 3-5 years or after major financial changes like opening substantial new ISA accounts. This ensures all your assets are clearly allocated to your intended beneficiaries.

Mistake 5: Not Understanding the Continuing ISA Period

Some people mistakenly believe that ISA tax benefits end immediately when someone dies. In reality, the ISA becomes a "continuing ISA" that remains open and tax-free for up to 3 years and 1 day after death.

This means your executor can keep the ISA invested during probate, allowing tax-free growth for months or even years during estate administration. For Stocks and Shares ISAs, this can result in significant additional tax-free returns that benefit your beneficiaries.

Your executor should understand this continuing ISA concept and not rush to close accounts unnecessarily.

Mistake 6: Assuming APS Must Be Invested With the Same Provider

Surviving spouses often believe they must invest their APS allowance with the deceased's ISA provider. This is incorrect—you can claim APS with any ISA provider willing to accept it (though note that providers aren't obliged to accept APS subscriptions).

This means you can shop around for the best ISA interest rates or investment platforms, rather than being locked into the deceased's provider. The only restriction is that if you do invest APS with a particular provider, the entire APS amount for that ISA type must go to that provider (you can't split it between multiple providers for the same ISA type).

Mistake 7: Gifting ISAs During Lifetime to Avoid IHT

Some people consider withdrawing money from their ISA during their lifetime to gift it to children or other beneficiaries, hoping to avoid Inheritance Tax. While gifts are IHT-free if you survive 7 years after making them, this strategy has a significant downside: you lose the ISA tax-free wrapper immediately upon withdrawal.

This creates a difficult trade-off. You lose ISA tax benefits now (potentially decades of tax-free growth) to potentially avoid IHT later (only if you die within 7 years of the gift).

A better approach for most people is to keep ISAs intact and consider other IHT planning strategies such as pension contributions (which fall outside your estate), ensuring you qualify for residence nil rate band, or making charitable bequests.

Mistake 8: Not Keeping Records of ISA Providers and Account Numbers

If your executor doesn't know where all your ISAs are held, they may not discover all your accounts during probate. This can lead to delays, potential unclaimed assets, and beneficiaries not receiving their full inheritance.

Maintain an updated list of all financial accounts including ISAs with current contact details for each provider. Share this list with your executor and store it securely with your will. Consider using an asset inventory template to organize this information systematically.

Peter died with a £70,000 ISA, leaving everything to his wife Linda. The executor didn't know about APS and simply transferred the cash to Linda 8 months after Peter's death. Linda invested £20,000 in her ISA using her normal allowance, not realizing she had an additional £70,000 APS allowance. Two years later, she discovered the APS rule but had less than 12 months left to use a £70,000 allowance—a tight timeframe to deploy that much capital efficiently. If the executor had informed her immediately, she could have used the APS over three years, maximizing her tax-free savings.

Frequently Asked Questions About ISAs and Wills

Q: Can you name a beneficiary for an ISA in your will?

A: Yes, you can name anyone you like as a beneficiary for your ISA in your will. When you die, the value of your ISA passes to the beneficiaries named in your will as part of your estate. If your spouse or civil partner is the beneficiary, they receive an Additional Permitted Subscription (APS) allowance equal to the ISA's value, allowing them to inherit the full amount tax-free in addition to their normal annual ISA allowance.

Q: What happens to an ISA when someone dies in the UK?

A: When you die, your ISA becomes a 'continuing ISA' that remains open for up to 3 years and 1 day. During this time, it keeps its tax benefits (no income tax or capital gains tax), but no new contributions can be made. The ISA value forms part of your estate and passes to beneficiaries named in your will. Your ISA provider will close the account after the 3-year period.

Q: Does a spouse inherit an ISA tax-free?

A: Yes, spouses and civil partners inherit ISAs completely tax-free due to the spousal exemption from Inheritance Tax. Additionally, the surviving spouse receives an Additional Permitted Subscription (APS) allowance equal to the deceased's ISA value (measured at death or account closure, whichever is higher). This APS allowance is separate from their normal £20,000 annual ISA limit and must be used within 3 years of death or 180 days after estate administration completes.

Q: Can I leave my ISA to my children in my will?

A: Yes, you can leave your ISA to your children or any other beneficiaries in your will. However, unlike spouses, children don't receive the Additional Permitted Subscription allowance or automatic Inheritance Tax exemption. If your total estate exceeds £325,000 (or £500,000 if leaving your home to direct descendants), your ISA will be subject to 40% Inheritance Tax on the amount above the threshold.

Q: What is an Additional Permitted Subscription (APS) for ISAs?

A: An Additional Permitted Subscription (APS) is a one-off ISA allowance given to surviving spouses or civil partners when someone dies. The APS equals the value of all the deceased's ISAs at death or account closure (whichever is higher). This allowance is in addition to the normal £20,000 annual ISA limit and must be used within 3 years of death or 180 days after estate administration. It preserves the tax-free status of the inherited ISA savings.

Q: Do ISAs have to go through probate?

A: Yes, ISAs must go through probate because they form part of the deceased's estate. The ISA is valued at the date of death for probate purposes, though the actual value may change before distribution to beneficiaries due to investment fluctuations. Stocks and shares ISAs particularly require probate for asset transfers, while cash ISAs also need probate authorization before funds can be distributed to beneficiaries.

Q: How long does a spouse have to claim an inherited ISA allowance?

A: A surviving spouse or civil partner must claim their Additional Permitted Subscription (APS) allowance within 3 years of the account holder's death or within 180 days after the estate administration completes, whichever is later. This deadline applies to all types of ISAs including cash ISAs, stocks and shares ISAs, and Lifetime ISAs. The APS can be claimed with the same ISA provider or a different one.

Need Help with Your Will?

Understanding ISA inheritance rules is important, but acting on that knowledge is what protects your beneficiaries. A clear will ensures your ISA savings go to the right people, your spouse knows about their APS entitlement, and your executor has the guidance they need.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete will (legally binding when properly executed and witnessed) plus three expert guides. Preview your will free before paying anything—no credit card required.

Learn more about including specific assets in your will and planning for inheritance tax:

Legal Disclaimer: This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

Sources:

  • HMRC Annual Savings Statistics 2025 - Official statistics on ISA ownership rates, account numbers, average values, and Lifetime ISA data

  • gov.uk

  • Gov.uk - Individual Savings Accounts: If you die - Official guidance on continuing ISAs, 3-year period, and tax treatment

  • gov.uk

  • Gov.uk - Inheriting an ISA from your spouse or civil partner - Official guidance on Additional Permitted Subscription rules and spouse eligibility

  • gov.uk

  • Gov.uk - How to manage additional permitted subscriptions - Technical guidance on claiming APS, deadlines, and provider requirements

  • gov.uk

  • HMRC Inheritance Tax Manual IHTM18097 - Official guidance on ISA valuation for Inheritance Tax and reporting requirements

  • gov.uk

  • Gov.uk - Inheritance Tax nil-rate band and residence nil-rate band thresholds - Official information on nil rate band, residence nil rate band, and IHT rates

  • gov.uk

  • Gov.uk - Individual Savings Accounts Overview - General information on ISA types, annual allowances, and rules

  • gov.uk