unmarried<\/a> partners).\u00a0<\/span><\/p>\nUpon death, all types of ISA (except a JISA) transform into a \u2018continuing account of a deceased investor\u2019.\u00a0<\/span><\/p>\nThis so-called \u2018continuing ISA\u2019 can then grow tax-free until the deceased\u2019s affairs are settled.\u00a0<\/span><\/p>\nThe tax benefits of the deceased ISAs transfer to their spouse using an Additional Permitted Subscription (APS).\u00a0<\/span><\/p>\nThe APS is a one-time ISA allowance that enables the surviving spouse to expand their ISA holdings up to the value of the deceased\u2019s ISA accounts.\u00a0<\/span><\/p>\nBy this mechanism, the tax-free status of the deceased\u2019s ISAs are passed on to their spouse.\u00a0<\/span><\/p>\nUnfortunately, the rules descend into a bureaucratic quagmire from there.\u00a0<\/span><\/p>\nISA inheritance rules for the Additional Permitted Subscription<\/span><\/h2>\nA surviving spouse qualifies for the APS even if the ISAs are actually willed to someone else.\u00a0<\/span><\/p>\nHowever, a spouse does not qualify if the couple are not living together at the time of death, or the marriage has broken down, they are legally separated, or in the process of being legally separated.\u00a0<\/span><\/p>\nThe value of the APS<\/strong> is the higher of:<\/span><\/p>\n\n- The ISA\u2019s worth at the date of death<\/span><\/li>\n
- Its value when the continuing ISA account is finally closed (assuming part of the APS hasn\u2019t already been used)<\/span><\/li>\n<\/ul>\n
The APS must be claimed separately from each of the deceased\u2019s ISA providers.\u00a0<\/span><\/p>\nYou can choose which of the two valuation options above apply to each ISA provider. You don\u2019t have to pick one option that applies across the board with every provider<\/span><\/p>\nThe APS can be used from the date of death.\u00a0<\/span><\/p>\nAlthough you\u2019d normally expect an APS to be funded by the inherited ISA assets, this is not necessary. An APS can be fulfilled by any assets the spouse owns.\u00a0<\/span><\/p>\nThe APS must be used<\/strong> within:<\/span><\/p>\n\n- Three years from the date of death<\/span><\/li>\n
- 180 days after the completion of the administration of the estate, if that\u2019s later.\u00a0<\/span><\/li>\n<\/ul>\n
The APS does not interfere with the spouse\u2019s own ISA allowance. They get that as normal.\u00a0<\/span><\/p>\nAPS subscriptions count as previous tax year subscriptions. <\/span><\/p>\nYou should check the terms and conditions of all your ISAs to ensure they adhere to APS provisions. ISA providers aren\u2019t automatically obliged to comply with the APS rules.\u00a0<\/span><\/p>\nAPS rules per ISA provider<\/span><\/h2>\nOne common restriction is that the spouse must use their APS with the same provider that runs the deceased\u2019s ISA account. This leads to extra complications, as we\u2019ll cover below.\u00a0<\/span><\/p>\nAs mentioned, the APS is divided into separate amounts that align to the value of the deceased\u2019s continuing ISA accounts \u2013 as held with each of their providers.<\/span><\/p>\nFor example:<\/span><\/p>\n\n- A continuing ISA worth \u00a3100,000 is held with provider A<\/span><\/li>\n
- A continuing ISA worth \u00a350,000 is held with provider B<\/span><\/li>\n<\/ul>\n
The surviving spouse can now fund up to \u00a3100,000 of APS in ISAs with provider A, and up to \u00a350,000 with provider B.\u00a0<\/span><\/p>\nYou can\u2019t fill ISAs worth \u00a375,000 with both providers. You can only \u2018spend\u2019 up to the limit of each APS per provider.\u00a0<\/span><\/p>\nHowever, you can split each APS between any number and type of ISA per provider. (Although there are restrictions on the Lifetime ISA.)<\/span><\/p>\nYou can fill both new and existing ISAs with each provider.\u00a0<\/span><\/p>\nTransferring inherited ISA assets<\/h4>\n
In specie transfers from a continuing stocks and shares ISA must be made within <\/span>180 days of the assets passing into the beneficial ownership of the surviving spouse.<\/span><\/p>\nThe in specie transfer can only be made to a stocks and shares ISA held by the spouse with the continuing ISA\u2019s provider.\u00a0<\/span><\/p>\nThe assets must be the same as those held on the date of death.\u00a0<\/span><\/p>\nAlternatively you can sell the investments for cash. The money can then be used to fund the APS with slightly fewer restrictions.\u00a0<\/span><\/p>\nYou can always transfer your ISAs to another provider as normal \u2013 after you\u2019ve used your APS.\u00a0<\/span><\/p>\nLifetime ISA APS restrictions\u00a0<\/span><\/h3>\nYou can\u2019t open a new Lifetime ISA unless you\u2019re aged between 18 to 40.\u00a0<\/span><\/p>\nYou can\u2019t pay into an existing Lifetime ISA unless you\u2019re under 50.\u00a0<\/span><\/p>\nThe APS does use up your \u00a34,000 annual Lifetime ISA allowance.\u00a0<\/span><\/p>\nYou can\u2019t pay APS into a Lifetime ISA if you\u2019ve already paid into one in the current tax year.\u00a0<\/span><\/p>\nA continuing ISA\u2019s tax-free growth limits<\/span><\/h2>\nBefore the deceased assets are transferred via the mechanism we\u2019ve just described, they grow tax-free in continuing ISAs until:<\/span><\/p>\n\n- Completion of the administration of the estate<\/span><\/li>\n
- The accounts closure by the deceased\u2019s executor<\/span><\/li>\n
- Three years and one day after the date of death. Then the account can be closed by the ISA provider\u00a0<\/span><\/li>\n<\/ul>\n
The earliest of these dates applies.\u00a0<\/span><\/p>\nThe value of the deceased\u2019s ISA holdings count towards their estate. The tax-free benefits are only passed to a surviving spouse.\u00a0<\/span><\/p>\nInheritance ISAs are a marketing label not an additional type of ISA. Every ISA can be inherited as described above. But please check your provider\u2019s T&Cs for additional restrictions.\u00a0<\/span><\/p>\nWhat happens to my ISA if I move abroad?<\/h2>\n
You can still put new money into your ISA for the remainder of the tax year when you stop being a UK resident. But you can\u2019t contribute new money again until your residential status changes back.<\/p>\n
Your ISA assets will continue to grow free of UK tax. But watch out! Your new country of residence may demand a slice.<\/p>\n
In addition:<\/p>\n
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