Can ISAs be inherited? What happens to an ISA if your other half dies


In the 2019 to 2020 tax year, the maximum amount that can be saved in ISAs is £20,000. This means that a person may put away up to the amount into their ISAs. There are four different types of ISA, and these are cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs. It’s possible to put money into one of each kind of ISA each tax year, with the latter type – Lifetime ISA – having a maximum annual amount of £4,000.

Tax is not paid on interest on cash in an ISA, or income or capital gains from investments in an ISA.

Some people may wonder whether ISAs can be inherited.

The Gov.uk website explains that if a spouse or civil partner dies, the surviving person can inherit their ISA allowance.

In addition to one’s normal ISA allowance, they can add a tax-free amount up to either the value they held in their ISA when they died, or the value of their ISA when it is closed.

One should contact their ISA provider or the provider of their spouse or civil partner’s ISA for details, Gov.uk states.

Should a person have died between December 3 2014 and April 5 2018, their ISA ended on the date of their death.

ISA investments form part of their estate for Inheritance Tax purposes.

The ISA provider can be instructed to sell the investments, and either pay the proceeds to the administrator or beneficiary of their estate, or transfer the investments directly to them.

The surviving spouse or civil partner can inherit their ISA allowance.

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In addition to the normal ISA allowance, one can add a tax-free amount up to the value they held in their ISA when they died.

What is the current Inheritance Tax rate?

The standard Inheritance Tax rate is 40 per cent.

However, this is only charged on the part of an estate that’s above the threshold.

This currently stands at £325,000 – however some people may have a greater threshold.

For instance, if a person gives their home to their children or grandchildren, the threshold can rise to £475,000.

What’s more, if a person is married or in a civil partnership and their estate is worth less than the threshold, any unused threshold can be added to the partner’s threshold when they die – meaning it could reach up to £950,000.

There is normally no Inheritance Tax to pay if one leaves everything above the £325,000 threshold to their spouse, civil partner, a charity or a community amateur sports club.



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