Yes, ISAs count for inheritance tax. The money and investments held in a cash ISA or a stocks and shares ISA form part of your estate when you die, and inheritance tax may be due on them at the standard rate of 40% on any value above the available tax-free thresholds (gov.uk, ISAs if you die, as at August 2026, subject to change).
This surprises a lot of savers, because ISAs are best known for being tax free. That freedom covers income tax and capital gains tax during your lifetime, and it does not extend to inheritance tax on death. This guide sets out how the rules work, the difference between the three taxes, the allowance for a surviving spouse or civil partner, and the narrower reliefs that can apply. Figures are current as at August 2026 and are subject to change.
Do ISAs count for inheritance tax?
ISAs count towards the value of your estate for inheritance tax in the same way as an ordinary bank account or share portfolio. When someone dies, HMRC looks at the total value of everything they owned, including ISAs, property, other savings, investments and possessions. Inheritance tax is then charged at 40% on the part of that total above the available nil-rate bands (gov.uk/inheritance-tax, as at August 2026, subject to change). A reduced rate of 36% can apply where at least 10% of the net estate passes to charity.
Most people can pass on a tax-free amount before inheritance tax applies. The nil-rate band is £325,000, and there is an additional residence nil-rate band of up to £175,000 where a home passes to direct descendants such as children or grandchildren. These thresholds, and the £2,000,000 taper threshold above which the residence band is gradually withdrawn, are frozen until 5 April 2031 (gov.uk, Inheritance Tax thresholds, as at August 2026, subject to change).
Tax free for income and gains, not for inheritance
The confusion around ISAs comes from the word "tax free". An ISA shelters your savings from two taxes while you are alive, but not from a third when you die.
| Tax | How an ISA is treated |
|---|---|
| Income tax | No income tax on interest or dividends earned inside the ISA. |
| Capital gains tax | No capital gains tax on growth in a stocks and shares ISA. |
| Inheritance tax | The ISA counts as part of your estate on death and may be taxed at 40%. |
Source: gov.uk/individual-savings-accounts and ISAs if you die, as at August 2026, subject to change.
The annual amount you can pay into ISAs is currently £20,000 across all your ISA accounts in a tax year (gov.uk/individual-savings-accounts, as at August 2026, subject to change). That limit governs contributions during life. It does not create any inheritance tax exemption on death.
What happens to your ISA when you die
An ISA does not simply vanish or transfer automatically. It keeps a special status, known as a continuing account of a deceased investor, for a period after death. During that window there is no income tax or capital gains tax on the ISA investments, but the value still forms part of the estate for inheritance tax.
| Stage | What happens |
|---|---|
| On death | The ISA becomes a continuing account. Its value is included in the estate for inheritance tax. |
| Until the estate is settled | No income tax or capital gains tax is charged on the ISA up to the date it closes. |
| Closure | The ISA closes when the executor completes administration, or automatically three years and one day after death if not closed sooner. |
Source: gov.uk, ISAs if you die, as at August 2026, subject to change.
Passing an ISA to a spouse or civil partner
Assets left to a spouse or civil partner are generally exempt from inheritance tax, and ISAs are no exception. If you leave your ISA to your husband, wife or civil partner, the spouse exemption usually means no inheritance tax is due at that point, whatever the ISA is worth (gov.uk/inheritance-tax, as at August 2026, subject to change). Inheritance tax may still apply on the second death when the survivor's own estate is assessed.
There is also a separate benefit that preserves the ISA tax wrapper itself. A surviving spouse or civil partner can claim an additional permitted subscription, sometimes called the APS or inherited ISA allowance. This is a one-off extra ISA allowance, on top of the normal £20,000, broadly equal to the value of the deceased's ISA (gov.uk, inheriting an ISA, as at August 2026, subject to change). It lets the survivor shelter the inherited money inside their own ISA. The additional permitted subscription preserves the income tax and capital gains tax status of the ISA; it does not remove the ISA from the estate for inheritance tax on the survivor's later death.
An ISA is tax free for the money you make. It is not tax free for the money you leave.
Can you reduce inheritance tax on an ISA?
Because ISAs sit inside the estate, the usual inheritance tax planning tools are what tend to matter, rather than anything specific to the ISA wrapper. Options that families commonly consider include the following.
- The spouse exemption. Leaving an ISA to a spouse or civil partner generally defers any inheritance tax to the second death.
- Lifetime gifts. Money taken out of an ISA and given away can fall outside the estate if you survive seven years, subject to the gifting rules and exemptions (gov.uk/inheritance-tax/gifts, as at August 2026, subject to change).
- Charitable gifts. Gifts to charity are exempt, and leaving 10% or more of the net estate to charity can reduce the rate on the rest to 36% (gov.uk/inheritance-tax, as at August 2026, subject to change).
- AIM ISAs and business relief. Some stocks and shares ISAs hold shares quoted on the Alternative Investment Market that can qualify for business relief. From 6 April 2026, this type of relief on such shares is set at 50% rather than the previous 100%, and the shares generally need to be held for at least two years (gov.uk/business-relief-inheritance-tax, as at August 2026, subject to change).
These approaches carry trade-offs. Giving money away means giving up access to it, and AIM shares are higher risk than mainstream investments and can fall in value. You can read more in our wider guide to inheritance tax and how it fits within estate planning.
- ISAs count as part of your estate for inheritance tax, taxed at up to 40% (gov.uk).
- No income tax or capital gains tax applies to the ISA up to the date it closes on death (gov.uk).
- The nil-rate band is £325,000 and the residence nil-rate band is up to £175,000, frozen until 5 April 2031 (gov.uk, Inheritance Tax thresholds).
- A surviving spouse or civil partner can claim an additional permitted subscription broadly equal to the deceased's ISA value (gov.uk).
Scotland and Northern Ireland
Inheritance tax is a UK-wide tax, so ISAs count towards the estate across the whole of the UK, including Scotland and Northern Ireland. The wider rules on how an estate passes differ by nation. Scotland has its own succession law, including legal rights that can entitle a spouse and children to a fixed share, and it uses confirmation rather than a grant of probate. Northern Ireland has a separate but broadly similar system to England and Wales. This guide describes the position in England and Wales.
Frequently asked questions
Are ISAs exempt from inheritance tax?
No. ISAs are not exempt from inheritance tax. The money in a cash ISA or a stocks and shares ISA is included in your estate when you die and may be taxed at up to 40% on any value above the available nil-rate bands (gov.uk, as at August 2026, subject to change). The tax-free reputation of ISAs relates to income tax and capital gains tax during your lifetime.
Do stocks and shares ISAs count for inheritance tax?
Yes. A stocks and shares ISA counts towards your estate for inheritance tax in the same way as a cash ISA. Any growth is free of capital gains tax, but the value on death still forms part of the estate (gov.uk, as at August 2026, subject to change). Some AIM shares held inside an ISA may qualify for business relief, which from 6 April 2026 is set at 50% (gov.uk, as at August 2026, subject to change).
Can my spouse inherit my ISA tax free?
Assets left to a spouse or civil partner are generally free of inheritance tax under the spouse exemption, and this covers an ISA (gov.uk, as at August 2026, subject to change). A surviving spouse or civil partner can also claim an additional permitted subscription, a one-off extra ISA allowance broadly equal to the value of the deceased's ISA, which preserves the tax wrapper (gov.uk, as at August 2026, subject to change).
What happens to an ISA when you die?
The ISA becomes a continuing account of a deceased investor. No income tax or capital gains tax is charged on it up to the date it closes, but its value is included in the estate for inheritance tax. The account closes when administration completes, or automatically three years and one day after death if not closed sooner (gov.uk, as at August 2026, subject to change).
How can I reduce inheritance tax on my ISA savings?
Because an ISA sits inside your estate, the usual planning tools tend to apply rather than anything unique to ISAs. These can include the spouse exemption, lifetime gifts made more than seven years before death, charitable giving, and in some cases business relief on qualifying AIM shares (gov.uk/inheritance-tax/gifts, as at August 2026, subject to change). Each option has trade-offs.
Is there an inheritance tax free ISA?
There is no ISA that is automatically free of inheritance tax. Some providers market AIM ISAs that hold shares qualifying for business relief, which can reduce the inheritance tax on those shares, but from 6 April 2026 that relief is set at 50% rather than 100%, and AIM shares carry higher investment risk (gov.uk, as at August 2026, subject to change). No ISA removes the underlying value from your estate simply by being an ISA.