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Stocks and Shares ISA in Your Will: What Happens When You Die?

· 22 min

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

Emma had diligently built her stocks and shares ISA to £68,000 over 12 years—her retirement safety net. When her colleague mentioned that ISAs "lose their tax-free status when you die," Emma panicked. Had she wasted years building a tax-efficient portfolio that would just get taxed anyway?

Worse, she had no will. Would her two children inherit anything, or would the taxman take it all?

Emma's confusion isn't unusual. Approximately 4 million UK adults hold stocks & shares ISAs worth an average of £65,000 each, with £456 billion held in stocks & shares ISAs nationwide. Yet most ISA investors don't understand what happens to their investments after death.

This article explains exactly what happens to your stocks and shares ISA when you die, how your beneficiaries can inherit tax-efficiently, and how to include your ISA properly in your will.

Table of Contents

What Happens to Your Stocks and Shares ISA When You Die?

Your stocks and shares ISA doesn't immediately lose its tax-free status when you die. This is one of the most misunderstood aspects of ISA inheritance.

Instead, your ISA becomes what's called a "continuing account of a deceased investor" from the date of death. This special status allows the account to remain tax-free for income and capital gains for up to 3 years and 1 day after your death.

No new contributions can be made to the account, but your existing investments continue to grow. Your executor manages the account during probate and can actively manage the investments according to the ISA's terms.

David, 55, died with a stocks & shares ISA worth £82,000. During the 8 months of probate, his ISA grew to £89,000. That £7,000 growth remained completely tax-free. His wife inherited the full £89,000 without any income tax or capital gains tax.

The value of your ISA at death becomes part of your estate for inheritance tax purposes. However, the continuing account rules protect your beneficiaries from unnecessary tax during the often lengthy probate process.

According to HMRC Annual Savings Statistics 2024, £725.9 billion is held in Adult ISAs across the UK. The continuing account rules ensure that this wealth can pass to beneficiaries without losing tax efficiency during estate administration.

The "Continuing Account of a Deceased Investor" Explained

The "continuing account of a deceased investor" is a special status for ISAs after the account holder dies. This status was introduced in April 2018 to protect beneficiaries during probate.

The continuing account lasts until one of three things happens: your executor closes it, your estate is fully administered, or 3 years and 1 day pass from your date of death—whichever comes first.

During this period, all interest, dividends, and capital gains remain tax-free. Your executor can actively manage the investments—switching funds, rebalancing portfolios, or selling holdings—but cannot add new money.

Sarah died on 15 March 2024. Her £95,000 stocks & shares ISA became a continuing account. Her executor could keep it invested until 16 March 2027 (3 years + 1 day). During that time, dividends and growth remained tax-free.

In reality, probate completed in 6 months, and her husband received the ISA in September 2024—with all growth since March still tax-free.

Here's how the continuing account compares to normal ISA status:

Before Death Continuing Account (After Death) After Account Closed
Tax-free growth Tax-free growth (up to 3 years) Taxable as normal
Annual contributions allowed No new contributions N/A
You manage account Executor manages Beneficiary owns assets
Protected from income/CGT Protected from income/CGT Subject to income/CGT (unless transferred to spouse's ISA)

The continuing account gives your estate up to 3 years to distribute your ISA without triggering unnecessary tax. This special status protects your beneficiaries during the probate period when they cannot yet access the investments but would otherwise face tax on any growth.

Can Your Spouse Inherit Your ISA Tax-Free?

Yes. When you leave your ISA to your spouse or civil partner, they receive two significant tax benefits.

First, there's no inheritance tax when your ISA passes to your spouse or civil partner. This is called the spousal exemption, and it applies to all assets you leave to a legally married spouse or civil partner you were living with at the time of death.

Second, your spouse receives an Additional Permitted Subscription (APS) allowance equal to the value of your ISA. This is where ISA inheritance becomes especially powerful for married couples.

James and Claire were married for 18 years. When James died, his stocks & shares ISA was worth £74,000. Claire inherited the £74,000 tax-free (no inheritance tax due to spousal exemption).

She also received a £74,000 APS allowance, meaning she could invest £74,000 + her normal £20,000 annual allowance = £94,000 into her own ISA that tax year.

The spousal exemption and APS allowance only apply if you were legally married or in a civil partnership at the time of death and were living together (not legally separated).

Common-law partners—no matter how long you've lived together—don't automatically qualify for these benefits. Without a will clearly leaving your ISA to an unmarried partner, they could inherit nothing under intestacy rules.

Your will should explicitly state you're leaving your ISA to your spouse to ensure smooth transfer and immediate access to the APS allowance.

Additional Permitted Subscription (APS): How It Works

The Additional Permitted Subscription is one of the most valuable—but least understood—benefits of ISA inheritance for spouses.

The APS is a special one-time allowance that lets your surviving spouse or civil partner inherit the tax-efficient status of your ISA, not just the cash value. The allowance equals the value of your ISA at the date of death or when the account closes, whichever is higher.

When Marcus died in June 2024, his ISA was worth £55,000. His wife Priya had already maxed out her £20,000 ISA allowance that year. But she received a £55,000 APS allowance, meaning she could invest an additional £55,000 before the end of the tax year or within 3 years of Marcus's death.

In total, she invested £75,000 into her ISA that year—far beyond the normal £20,000 limit.

The APS allowance is available for 3 years from the date of death. It's on top of your normal annual ISA allowance, so it doesn't reduce your £20,000 limit.

You can use the APS with the same ISA provider as your deceased partner, or you can choose a different provider. You can split it between cash ISAs, stocks & shares ISAs, or Lifetime ISAs—though not Junior ISAs.

Here's how to claim your APS allowance:

  1. Obtain your partner's death certificate and Grant of Probate
  2. Contact the deceased's ISA provider(s) to notify them of the death
  3. Request the APS application form (each provider has their own form)
  4. Decide how much to invest and which provider(s) to use
  5. Complete the APS form within 3 years of death
  6. Transfer the inherited funds into your own ISA wrapper
  7. Your investments continue growing tax-free in your ISA

Here's the difference the APS makes:

Without APS With APS
Inherit £65,000 cash Inherit £65,000 APS allowance
Can invest only £20,000 in ISA that year Can invest £65,000 + £20,000 = £85,000 in ISA
Remaining £45,000 subject to tax on growth All £85,000 continues growing tax-free
Loses long-term tax efficiency Preserves tax efficiency for life

You must actively claim the APS allowance within 3 years of your partner's death. It doesn't happen automatically. The APS allowance is in addition to your normal £20,000 annual ISA limit, giving you the opportunity to preserve decades of tax-efficient investing.

What If You Leave Your ISA to Children or Other Beneficiaries?

Children and other non-spouse beneficiaries can inherit the cash value of your stocks and shares ISA, but they don't get the tax-free wrapper or the APS allowance. These benefits are exclusively for surviving spouses or civil partners.

Elena left her £48,000 stocks & shares ISA to her two adult sons (£24,000 each). The executor could transfer the actual shares to each son, or sell them and distribute cash.

Her sons received the investments but without the ISA wrapper—future dividends and capital gains became taxable in their own names. Each son could use their own £20,000 annual ISA allowance to re-shelter some investments, but not the full inherited amount in one year.

When you leave your ISA to children or other beneficiaries, they inherit the investments as they would any other asset from your estate. The continuing account rules still apply during probate, keeping the investments tax-free during estate administration.

But once the executor distributes the ISA to non-spouse beneficiaries, those investments lose their tax-free status. Future growth, dividends, and interest become subject to income tax and capital gains tax as normal.

If you're leaving your ISA to a child under 18, the executor will hold the inheritance until the child reaches adulthood, unless you've set up a trust structure in your will with different age provisions.

Consider whether you want your children to receive large investment portfolios directly or through a trust that provides more control over how and when they access the funds—particularly if they're young adults or if the amount is substantial.

According to HMRC guidance, inheritance tax may apply if your total estate exceeds £325,000 (or £500,000 if you're passing on your home to children with the residence nil-rate band).

Are Stocks and Shares ISAs Subject to Inheritance Tax?

Yes. This is one of the most important—and misunderstood—aspects of ISA inheritance.

Your stocks and shares ISA is tax-free during your lifetime for income tax and capital gains tax. But when you die, the value of your ISA is included in your estate for inheritance tax calculations.

Many investors mistakenly believe that because ISAs are "tax-free," they're exempt from inheritance tax. They're not.

Oliver had a £92,000 stocks & shares ISA, £180,000 in other savings, and a £420,000 house. Total estate: £692,000. He left everything to his adult daughter.

With a £500,000 threshold (£325,000 standard nil-rate band + £175,000 residence nil-rate band for passing his home to his child), inheritance tax was 40% × (£692,000 - £500,000) = £76,800.

His ISA value was included in that calculation. If he'd left the ISA to a spouse instead, no inheritance tax would be due thanks to spousal exemption.

Here's how inheritance tax applies in different scenarios:

Scenario Estate Value IHT Threshold IHT Due
Single person, no property £325,000 £325,000 £0
Single person with £92,000 ISA + £250,000 property + £50,000 savings £392,000 £500,000 (with RNRB) £0
Single person with £92,000 ISA + £420,000 property + £180,000 savings £692,000 £500,000 £76,800
Married couple, everything to spouse Any amount Unlimited (spousal exemption) £0

The most effective way to avoid inheritance tax on your ISA is to leave it to your spouse or civil partner, who can then use their own allowances and the combined thresholds when they eventually pass the wealth on. Married couples can combine their allowances, potentially passing on up to £1 million without inheritance tax if they own a home they're leaving to children or grandchildren.

ISAs are free from income tax and capital gains tax during your lifetime and during the continuing account period after death, but their value is included in your estate for inheritance tax purposes.

How to Include Your Stocks and Shares ISA in Your Will

Including your stocks and shares ISA in your will provides clarity for your executor and ensures your investments go to your intended beneficiary.

You should mention your ISAs specifically in your will, even though they're technically part of your estate anyway. This clarity prevents confusion and potential disputes during probate.

You have two main options for including ISAs in your will.

Option 1: Leave ISA as a Specific Legacy

You can name your ISA (or all ISAs) as a specific gift to a named person:

"I give my stocks and shares ISA held with Vanguard, account number XXXX, to my spouse Emma Wilson. If my spouse does not survive me, I give this ISA to my children James Wilson and Sophie Wilson in equal shares."

Option 2: Include ISA in Residuary Estate

You can include your ISAs as part of your residuary estate (everything left after specific gifts and debts):

"I give all my investments, including any stocks and shares ISAs, cash ISAs, and investment accounts held at the date of my death, to my spouse Robert Davies absolutely."

Sophie had ISAs with three providers: Vanguard (£42,000), Hargreaves Lansdown (£18,000), and AJ Bell (£12,000). In her will, she wrote:

"I give all Individual Savings Accounts held in my name at the date of my death, including but not limited to stocks and shares ISAs and cash ISAs with any provider, to my husband Robert."

This ensured all ISAs went to Robert without ambiguity, even if she opened new accounts after making the will.

Here's a checklist for including ISAs in your will:

  • Identify all ISA providers and account types you currently hold
  • Decide who inherits (spouse, children, or other beneficiaries)
  • Choose specific legacy or residuary clause approach
  • Consider backup beneficiaries if your primary beneficiary doesn't survive you
  • Include instructions for your executor (sell vs transfer investments)
  • Update your will when you open new ISAs or change providers
  • Store account details in a safe place accessible to your executor

Using broad language like "all ISAs held at the date of my death" ensures you don't need to update your will every time you open a new account or switch providers.

Mention your ISAs in your will to ensure they go to your intended beneficiary and to help your executor understand the full scope of your investment accounts.

Common Mistakes People Make with ISAs and Wills

Understanding what not to do can be just as important as knowing what to do when planning ISA inheritance.

Mistake 1: Not mentioning ISAs in your will at all

Many people assume their ISA will automatically go to the right person without specific instructions. Without mention in your will, your ISA becomes part of your residuary estate. If you haven't clearly defined who gets your residuary estate, or if you have no will at all, your ISA may not go to your intended beneficiary.

Mistake 2: Assuming your partner automatically inherits

This is particularly dangerous for unmarried couples. Tom and Lisa lived together for 14 years but never married. Tom died without a will, leaving a £76,000 ISA and £240,000 flat.

Under intestacy rules, everything went to his parents—Lisa inherited nothing and received no APS allowance. If Tom had made a will leaving everything to Lisa, she would have inherited (though without the spousal exemption for inheritance tax or APS allowance, since they weren't married).

Only legally married spouses or civil partners qualify for the spousal exemption and APS allowance. Unmarried partners must be specifically named in your will to inherit anything.

Mistake 3: Not understanding the difference between spouse and non-spouse inheritance

Some people leave their ISA directly to children to "avoid the ISA going through probate twice" (once when they die, once when their spouse dies). But this loses the valuable APS allowance.

Leaving your ISA to your spouse first allows them to use the APS to preserve the tax-free wrapper, potentially for decades more of tax-free growth. They can then leave the enhanced ISA to children in their own will.

Mistake 4: Forgetting to update your will when you open new ISAs

If your will says "I give my stocks and shares ISA with Vanguard to my daughter," but you later open a new ISA with Hargreaves Lansdown, that second ISA isn't covered by the specific legacy.

Use broad language like "all ISAs held at the date of my death" to cover current and future accounts.

Mistake 5: Not telling your executor where ISA details are kept

Your executor can't claim the APS allowance or distribute your ISA properly if they don't know it exists. Keep a list of all ISA providers with account numbers in a secure location your executor knows about—your password manager, a safe, or with your solicitor.

Mistake 6: Cashing out your ISA before death to "simplify" inheritance

Cashing out your ISA destroys years or decades of tax-free growth. The cash is still part of your estate for inheritance tax anyway, so you've gained nothing from a tax perspective.

The continuing account rules make ISA inheritance straightforward. Keep your ISA invested and specify in your will who should inherit it.

These are the most common ISA inheritance mistakes we see—all easily preventable with a proper will. The time to fix these issues is now, while you're alive to make clear decisions.

Protecting Your Investments: What to Do Now

You've spent years building your stocks and shares ISA. Here's how to ensure your investment passes smoothly to your beneficiaries.

Step 1: Take inventory of your ISAs

List all your ISA providers, account numbers, and current approximate values. Note whether each is a stocks & shares ISA, cash ISA, Lifetime ISA, or Innovative Finance ISA.

Store this information securely—in a password manager, in a safe, or with your solicitor—somewhere your executor can find it.

Step 2: Decide who should inherit

If you're married or in a civil partnership, consider leaving your ISA to your spouse first. They'll benefit from no inheritance tax and the valuable APS allowance, potentially preserving tax-free growth for decades more.

If you're leaving your ISA to children or other beneficiaries, understand they'll inherit the value but not the tax-free wrapper or APS allowance.

If you have no spouse and multiple beneficiaries, decide whether to split your ISA equally or allocate it differently based on circumstances.

Step 3: Create or update your will

Use clear language about your ISA inheritance. Reference "all ISAs held at the date of my death" to cover current and future accounts.

Name an executor who understands your investment accounts, or at least someone you trust to work with financial professionals to handle the investments properly.

Creating a will with WUHLD takes just 15 minutes and ensures your ISA allocation is legally documented.

Step 4: Inform your executor

Tell your executor where your ISA account details are stored. If you're leaving your ISA to your spouse, explain the APS allowance so they know to claim it within 3 years.

Give your executor a copy of this article as a reference guide for handling ISA inheritance.

Step 5: Review annually

Review your will whenever you open a new ISA, close an account, or switch providers. Major life events—marriage, divorce, birth of children—should also trigger a will review.

Check your estate value relative to inheritance tax thresholds, particularly if your ISA and other assets are growing significantly.

After reading this article, Rachel realized she had no will despite having £58,000 in stocks & shares ISAs. She spent 15 minutes creating a will with WUHLD, leaving her ISAs to her husband James with her two daughters as backup beneficiaries.

She stored her ISA account details in her password manager and told James where to find them. Total time investment: 30 minutes. Peace of mind: priceless.

Use this checklist to protect your ISA investments:

  • List all ISA accounts with providers, account numbers, and approximate values
  • Decide who inherits each ISA (or all ISAs together)
  • Create or update your will with clear ISA inheritance language
  • Tell your executor where ISA account details are stored
  • Explain the APS allowance to your spouse if applicable
  • Review and update your will annually or after major life events

Creating a will that properly covers your ISAs takes just 15 minutes with WUHLD. The best time to sort this out is now, while you can make clear decisions.

Frequently Asked Questions

Q: What happens to my stocks and shares ISA when I die?

A: Your stocks and shares ISA becomes a "continuing account of a deceased investor" and remains tax-free for up to 3 years and 1 day after your death. The account cannot receive new contributions, but existing investments continue to grow tax-free until the executor closes it or the estate is settled. Your beneficiaries inherit the value according to your will.

Q: Can my spouse inherit my stocks and shares ISA tax-free?

A: Yes, if you leave your ISA to your spouse or civil partner, they won't pay inheritance tax due to spousal exemption. They also receive an Additional Permitted Subscription (APS) allowance equal to the ISA's value at your death, allowing them to invest that amount in their own ISA without affecting their annual £20,000 limit.

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

A: The APS is a special allowance that lets surviving spouses or civil partners inherit the tax-efficient status of a deceased partner's ISA. If your partner's ISA was worth £65,000 at death, you get an additional £65,000 ISA allowance on top of your normal £20,000 annual limit. You have 3 years from the date of death to use this allowance.

Q: Do I have to pay inheritance tax on stocks and shares ISAs?

A: Stocks and shares ISAs are included in your estate for inheritance tax purposes. If your total estate exceeds £325,000 (or £500,000 including residence nil-rate band), the ISA value above this threshold may be subject to 40% inheritance tax. However, ISAs left to a spouse or civil partner are exempt from inheritance tax.

Q: Should I mention my stocks and shares ISA in my will?

A: Yes, you should include your stocks and shares ISA in your will to specify who inherits it. Without clear instructions, the ISA becomes part of your residuary estate and may not go to your intended beneficiary. You can leave it to specific individuals or include it as part of your residuary estate with clear allocation instructions.

Q: Can children inherit stocks and shares ISAs?

A: Yes, children can inherit the cash value of your stocks and shares ISA, but they cannot inherit the tax-free wrapper or APS allowance—those benefits are only available to surviving spouses or civil partners. If the inherited amount is significant, consider whether the child should receive the investments directly or through a trust structure in your will.

Q: What happens to ISA investments during probate?

A: During probate, your ISA remains open as a continuing account and continues to grow tax-free for up to 3 years after death. The executor manages the account but cannot make new contributions. Once probate is granted, the executor can distribute the investments according to your will—either selling them for cash or transferring investments to beneficiaries.

Conclusion

Your stocks and shares ISA inheritance planning doesn't have to be complicated. Here are the key takeaways:

  • Your ISA becomes a continuing account after death, remaining tax-free for up to 3 years during probate
  • Spouses inherit tax-free and receive an Additional Permitted Subscription allowance equal to your ISA value
  • Children and other beneficiaries inherit the value but not the tax-free wrapper or APS allowance
  • ISAs are included in your estate for inheritance tax (but exempt if left to your spouse)
  • Include your ISAs clearly in your will to ensure smooth inheritance and prevent disputes

You've spent years building your stocks and shares ISA—carefully contributing, watching it grow, protecting it from tax. Don't let uncertainty about inheritance rules undermine all that careful planning.

Your beneficiaries deserve to inherit your investments with clarity and the maximum tax efficiency possible. A will ensures your ISA goes exactly where you intend it to.

Create your will and include your stocks and shares ISA allocation today. With WUHLD, it takes just 15 minutes online.

For £99.99 (vs £650+ for a solicitor), you'll get:

  • Your complete, legally binding will with clear ISA allocation
  • A 12-page Testator Guide
  • A Witness Guide
  • A Complete Asset Inventory document

You can preview your entire will free before paying anything.

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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.

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