Inheriting ISAs: explained

Planning on leaving your ISA to a loved one? Here’s what you need to

know.

Individual savings accounts (ISAs) are a great option for tax-free saving, but it’s important to understand the rules around inheriting ISAs if you want your beneficiaries to make the most of your legacy.

What is an ISA?

A savings account in which your earnings are tax-free. Every year, the government sets a limit on tax-free savings. This is your ISA allowance, and it’s £20,000 for the 2025/26 tax year.

Who can inherit an ISA

Anyone can inherit the funds in an ISA, but only a spouse or civil partner can retain the tax benefits thanks to the additional permitted subscription (APS), also known as an inherited ISA allowance’.

How does the APS work?

An APS is an extra allowance that your spouse or civil partner can add to their existing ISA allowance. It’s based on the value of an open ISA held in your name when you pass away or the value as at date of transfer. Your spouse or civil partner must be living with you at the time of your death.

For example, if you have £20,000 set aside in an ISA when you die, your spouse or civil partner’s ISA allowance increases to £40,000 (their £20,000 allowance plus the additional £20,000 from the ISA they’ve inherited). This means they can pay the money from the inherited ISA into another account without paying tax on it.

An APS must be claimed within three years of the death of the account holder or up to 180 days after administration of the estate is complete, depending on the assets held in the account(s) and whichever deadline is sooner.

Can someone else inherit an ISA?

If you leave money in an ISA to a beneficiary that isn’t your spouse or civil partner, the funds will form part of your estate and be subject to inheritance tax (if the value of your estate exceeds £325,000, in the 2025/2026 tax year).

What can my spouse or civil partner do with their APS?

They’re under no obligation to stay with the same provider of the inherited ISA. They can transfer up to the value of their APS in any type of ISA if the provider accepts transfers from inherited ISAs. As with any saving decision, it’s worth shopping around to find the best deal.

An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.