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Stocks and Shares

Also known as: Equities, Securities, Shareholdings

Definition

Stocks and shares are units of ownership in companies (also called equities or securities) that form part of your estate and must be identified, valued, and distributed according to your will.

When you own shares, you're a part-owner of that business and may receive dividends and benefit from increases in share value. These investments are valuable assets that must be properly documented and distributed to your chosen beneficiaries.

What Do Stocks and Shares Mean?

Under UK law, stocks and shares represent ownership units (equity) in companies, whether publicly listed on stock exchanges like the London Stock Exchange or privately held. The terms are used interchangeably in the UK, though "shares" more commonly refers to individual company ownership while "stocks" is a broader term. Legally, they fall under "securities" as defined in the Companies Act 2006, Section 783, which includes shares, debentures, loan stock, bonds, and units of collective investment schemes.

For estate planning purposes, HMRC distinguishes between listed shares (traded on recognised exchanges with readily available market values) and unlisted shares (private company shares requiring professional valuation). Common holdings include direct shares, stocks and shares ISAs, employee share schemes, and investment trusts held through platforms like Hargreaves Lansdown, Vanguard, or AJ Bell.

You don't need to list individual shares in your will—you can reference "my investment portfolio" or specific accounts. Your executor identifies all shareholdings using share certificates, online platforms, and dividend records. Listed shares are valued at the date of death using the "quarter-up rule"—the lower price plus one-quarter of the difference between the lowest and highest closing prices that day. For example, if shares closed between 1091p and 1101p, the quarter-up price is 1093.5p (1091p + 2.5p). Professional valuations are required for unlisted shares.

Sarah has a stocks and shares ISA with Vanguard worth £45,000. She leaves her entire estate to her husband David. David inherits an Additional Permitted Subscription (APS) allowance of £45,000, allowing him to deposit this amount into his own ISA while maintaining the tax-free wrapper. If Sarah had left the ISA to her sister instead, it would lose its tax-free status and count toward Sarah's estate for inheritance tax purposes.

Stocks and shares form part of your taxable estate under standard inheritance tax rules (£325,000 nil-rate band applies). Despite being income-tax-free during your lifetime, ISA holdings are subject to inheritance tax on death. The exception is for spouses and civil partners, who receive an APS allowance to preserve the tax-free wrapper. From April 2026, unlisted shares in trading companies may qualify for 50% Business Property Relief if held for two or more years, reduced from 100% relief following the 2024 Autumn Budget. Many AIM shares also qualify for 50% relief. Beneficiaries don't pay capital gains tax on inheriting shares (values are rebased to date of death), but pay CGT on subsequent gains.

Common Questions

"Do I need to list all my stocks and shares individually in my will?" No, you don't need to list individual stocks and shares. You can simply refer to "my investment portfolio" or "all my stocks and shares held in [brokerage name]" in your will. Your executor will identify all shareholdings during estate administration using share certificates, online accounts, and the probate asset search process.

"What happens to dividends on shares after I die but before my estate is distributed?" Dividends received after your death belong to your estate and are collected by your executor during administration. The estate pays income tax at 8.75% on these dividends (with no dividend allowance). If shares are left as a specific legacy, the beneficiary receives both the shares and any dividends paid between death and transfer.

"Are stocks and shares held in an ISA exempt from inheritance tax?" No, ISA holdings are subject to inheritance tax like other assets, despite being income-tax-free during your lifetime. If your spouse or civil partner inherits your ISA, they receive an Additional Permitted Subscription (APS) allowance to maintain the tax-free wrapper. Non-spouse beneficiaries lose the ISA tax benefits and the assets form part of your taxable estate.

Common Misconceptions

Myth: My stocks and shares ISA is tax-free, so it won't count toward inheritance tax

Reality: ISAs are only exempt from income tax and capital gains tax during your lifetime. When you die, the value of your ISA holdings is included in your estate for inheritance tax purposes. The only exception is for spouses and civil partners, who receive an Additional Permitted Subscription (APS) allowance equal to the ISA value, preserving the tax-free wrapper.

Myth: I need to get professional valuations for all my shares when making my will

Reality: You don't need valuations when writing your will—only when you die. For listed shares traded on stock exchanges, your executor can find the closing price on the date of death through stock exchange websites or financial newspapers using the quarter-up rule. Professional valuations are only needed for unlisted shares in private companies where there's no public market price.

  • Investment Portfolio: The broader category of assets that typically includes stocks and shares alongside bonds, funds, and cash holdings.
  • ISA: The tax wrapper commonly used to hold stocks and shares for tax-efficient investing during your lifetime.
  • Business Assets: Unlisted shares in trading companies qualify as business assets and may receive 50% Business Property Relief for inheritance tax purposes from April 2026.
  • Company Shares: The specific subset referring to shares in private or unlisted companies, requiring professional valuation and possibly shareholder agreement considerations.
  • Dividends: The income generated by shareholdings, with specific tax treatment during estate administration at 8.75% with no dividend allowance.

Need Help with Your Will?

Understanding how your stocks and shares will be distributed is essential for protecting the investment portfolio you've built. Whether you hold shares in ISAs, through online platforms, or in private companies, your will ensures these valuable assets pass to your chosen beneficiaries according to your wishes.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete, legally binding will plus three expert guides. Preview your will free before paying anything—no credit card required.

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.