ISAs are a popular way of saving and investing tax-efficiently. However, many people are unaware that, when a spouse or civil partner dies, the survivor can inherit their ISA allowance in addition to their own. 

This is known as an Additional Permitted Subscription (APS) and can provide a valuable opportunity for the surviving spouse or civil partner to continue investing tax-free. 

The rules depend on when the spouse or civil partner died. 

• For deaths before 3 December 2014 a spouse or civil partner cannot inherit the deceased’s ISA allowance. 

• For deaths between 3 December 2014 and 5 April 2018, the ISA ended on death. The investments formed part of the deceased’s estate for Inheritance Tax purposes. The surviving spouse or civil partner could inherit an additional ISA allowance equal to the value held in the ISA at the date of death. 

• For deaths on or after 6 April 2018, the ISA becomes a “continuing account of a deceased investor”. The investments form part of the deceased’s estate but remain tax-free until the ISA is closed. The ISA will end when the executor closes it, the administration of the estate is completed, or three years after death, whichever occurs first. No new payments can be made into the ISA during this period. The surviving spouse or civil partner can receive an additional tax-free allowance based on either the value of the ISA at the date of death or its value when the ISA is closed. 

It is important to note that the ISA savings themselves go to the named beneficiary in the Will. The inherited ISA allowance is a separate benefit available to the surviving spouse or civil partner. 

At Heppenstalls we provide a full estate administration service for executors and administrators; we can assist you in claiming the APS. Anyone dealing with an estate themselves should contact the relevant ISA provider for details of the allowance and the steps required to use it.