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Individual Savings Accounts (ISAs)


ISAs provide a wrapper in which an individual can save and invest in a tax-sheltered environment. Alongside pensions and property, ISAs are one of the most popular ways for people in the UK to hold wealth.

Some well-known tax benefits of investing in ISAs include:

  • Not having to pay capital gains tax on profits made.
  • Not having to pay any tax on interest earned.
  • Not having to pay any tax on dividend income.

Autumn statement 2023

In the Autumn statement on 22 November 2023, several reforms were announced to help simplify ISAs. The Government stated an intention to allow certain fractional shares contracts as a permitted investment within eligible ISA investments and that they would digitalise the ISA reporting system.

They also confirmed that from April 2024:

  • Individuals will be able to pay subscriptions to multiple ISAs of the same type every year.
  • Partial transfers of current tax year ISA funds between providers will be allowed.
  • The requirement to reapply for an existing dormant ISA annually will be removed.
  • The Innovative Finance ISA will be able to include long-term asset funds and open-ended property funds with extended notice periods as permitted investments.
  • The account opening age for any adult ISA will be harmonised to age 18.

The industry still hasn’t seen the draft regulations or final detail for these changes.  However, we currently have no reason to believe that it’s not still the government’s policy intention to proceed with these announcements.

ISA wealth and position on death

ISAs have been available since 1999 and currently contributions of up to £20,000 each tax year can be made. In addition, savings built up in earlier tax-incentivised savings vehicles known as personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) have subsequently been rolled into ISAs.

Many older people in the UK have therefore built-up substantial ISA wealth. For the remainder of this update, we will look at what happens to an ISA when an individual dies.

Position before 6 April 2015

Prior to 6 April 2015, when the owner died, the ISA ended, and the investments held within it lost their tax benefits.

This could make administration of an estate more complex. The deceased’s personal representatives would have to account for tax due on capital gains, interest and dividend income arising from the assets that were previously held within the tax-exempt ISA wrapper during the administration period.

In many estates, there is a surviving spouse who inherits all the investments. The fact that the ISA wrapper was lost meant the spouse would now have to assess and account for tax due (on capital gains, dividends, and interest) from these investments. This would often be a challenge for a widowed pensioner with limited tax knowledge and no prior experience of submitting tax returns via self-assessment.

Position between 6 April 2015 - 5 April 2018

On 6 April 2015, the Additional Permitted Subscription (APS) was introduced which partly solved these problems. The APS allows a surviving spouse/civil partner (who had been living with the deceased) to inherit a one-off additional ISA allowance equivalent to the value of the deceased’s ISA at the time of death. One APS allowance is received from each ISA Manager the deceased held an ISA with.

However, the administration of an estate is often not a quick process, during which time any growth in the investments would still be exposed to tax. Furthermore, where assets did grow, the APS didn’t; this meant that the surviving spouse was not always able to rewrap all the assets in an ISA once the administration of the estate was complete.

Position from 6 April 2018

Since 6 April 2018, further changes have been made to how ISAs are treated when someone dies. Today:

  • The ISA wrapper automatically turns into a ‘continuing account of a deceased investor’ or ‘continuing ISA’.
  • The continuing account retains all the tax benefits of the ISA, so can grow tax efficiently.
  • The continuing account will last until the administration of the deceased’s estate is complete, the continuing account is closed, or 3 years have passed since death - whichever happens sooner.
  • The APS received by the surviving spouse is normally the ISA value at the date the continuing account is closed or the ISA value at date of death if this is higher.

It’s worth noting that a spouse does not need to take over the existing ISA. They can transfer their APS allowance to another ISA manager if they wish and make an APS payment to that manager instead.


The introduction of the APS and ‘continuing account’ have greatly helped individuals dealing with ISAs after a death.

However, regarding the APS, it is important to remember that only a legal spouse or civil partner of the deceased can benefit – a long term partner cannot. In addition, the spouse/civil partner will need to have been living with the deceased at the point of death (it is acceptable to state that they lived together where the deceased was in a care home or hospital due to ill health or incapacity).

Finally, it’s worth noting that the APS is an additional subscription that the surviving spouse/civil partner can make, even if they are not the actual beneficiary of the ISA under the Will (the money invested to utilise the APS allowance doesn’t need to come from an ISA, it can come from other assets). This can be useful for wealthier couples who want to leave assets to children on death, instead of each other.

Important Information

Please note this is for general information only and is based on LV=’s understanding of the relevant legislation and regulations and may be subject to change.

The tax treatment of benefits depends on individual circumstances, and may be subject to change in the future.

The use of this document is at your own risk, and the content should not be used for the provision of professional advice.

LV= accept no liability for any damages, losses or causes of action of any nature arising from your use of this document.