What Happens to ISAs and Investments When Someone Dies in the UK

What Happens to ISAs and Investments When Someone Dies in the UK

When someone dies, their ISAs, shares, and other investments don't simply disappear. They become part of the deceased's estate, and it falls to the executor or administrator to work out what's there, what it's worth, and what to do with it.

This guide explains what happens to different types of investments after a death, how tax rules apply, and what steps you need to take.

ISAs: The Tax-Free Wrapper Ends at Death

Individual Savings Accounts (ISAs) lose their tax-free status when the holder dies. However, the rules are more generous than many people realise.

What happens immediately

From the date of death, an ISA becomes a "continuing account of a deceased investor." It keeps its tax-free status until one of three things happens:

• The account is closed
• The estate administration is completed
• Three years pass from the date of death

Whichever comes first, the ISA remains sheltered from tax during that window. After that point, any growth or income becomes taxable.

The Additional Permitted Subscription (APS)

If the deceased held ISAs and had a spouse or civil partner, the surviving partner gets an Additional Permitted Subscription (APS). This means they can invest an additional amount into their own ISA equal to the value of the deceased's ISA holdings, on top of their normal annual ISA allowance.

This applies regardless of whether the surviving partner inherits the ISA funds directly. The APS can be used with any ISA provider, not just the one the deceased used.

Important: The APS must be used within specific time limits. For cash ISAs, within three years of death or 180 days after the estate is finalised (whichever is later). For stocks and shares ISAs, the rules are similar but check with the provider for exact deadlines.

Shares and Investment Portfolios

Shares held directly (outside an ISA) form part of the estate and need to be valued at the date of death for probate and inheritance tax purposes.

How shares are valued

The valuation method depends on whether the shares are listed or unlisted:

Type of holding	How it's valued
Listed shares (e.g. FTSE stocks)	Mid-market price on the date of death, or the average of the highest and lowest dealing prices
Unit trusts and OEICs	The bid price on the date of death
Unlisted or private company shares	Professional valuation usually required
Investment trusts	Mid-market price, same as listed shares

You can find historical share prices through the London Stock Exchange website or by contacting the relevant share registrar.

Capital gains tax position

When someone dies, there is no capital gains tax (CGT) on the increase in value up to the date of death. The beneficiaries inherit the investments at their market value on the date of death. This is sometimes called a "tax-free uplift."

If beneficiaries later sell the investments for more than the date-of-death value, they may owe CGT on the gain from that point onwards.

Premium Bonds

Premium Bonds are handled differently from other investments. They remain in the prize draw for 12 full calendar months after the holder's death. Any prizes won during this period are paid to the estate.

After 12 months, the bonds must be cashed in. They cannot be transferred to another person. NS&I will need a copy of the death certificate and either the grant of probate or letters of administration (if the holding is over a certain value).

Pensions and Drawdown Funds

Pension investments follow their own rules and are generally outside the estate for inheritance tax purposes. If you need guidance on pensions specifically, our separate guide on what happens to a pension when someone dies covers this in detail.

What Executors Need to Do

If you're the executor or administrator, here's a practical sequence for dealing with investments:

1. Identify all holdings

Check paperwork, bank statements, and correspondence. Look for:

• ISA statements (cash and stocks and shares)
• Share certificates
• Platform login details (Hargreaves Lansdown, AJ Bell, Vanguard, etc.)
• Premium Bond holder's numbers
• Dividend payment records
• Annual tax statements from investment providers

2. Notify each provider

Contact each investment provider with a copy of the death certificate. They will freeze the account and provide a date-of-death valuation for probate.

3. Get valuations for probate

You'll need accurate date-of-death valuations for every investment. These figures go on the inheritance tax forms (IHT400 or the simpler IHT205/IHT217 if applicable). Most providers will supply these on request.

4. Wait for probate

Most investment providers will not release or transfer assets until they've seen the grant of probate or letters of administration. Smaller holdings (typically under a set threshold per provider) may be released without probate.

5. Distribute or transfer

Once probate is granted, you can either:

• Cash in the investments and distribute the proceeds to beneficiaries
• Transfer the investments directly into beneficiaries' names (known as an "in specie" transfer)

Transferring in specie can be tax-efficient because it avoids crystallising a gain. The beneficiary takes on the date-of-death base cost.

Inheritance Tax on Investments

Investments form part of the taxable estate. The current inheritance tax threshold is the nil-rate band, and estates above this may owe inheritance tax at 40% on the excess.

Some investments qualify for Business Relief (formerly Business Property Relief), which can reduce the inheritance tax bill. AIM-listed shares, for example, may qualify for 100% Business Relief if held for at least two years, though this is subject to ongoing rule changes.

Our guide on how to calculate inheritance tax walks through the full calculation.

Getting Help

Dealing with a deceased person's investments can feel overwhelming, particularly if the holdings are complex or spread across multiple providers. A few things that can help:

• The Share Registrar (such as Equiniti or Computershare) can guide you through transferring or selling individual shareholdings
• The investment platform's bereavement team will usually have a dedicated process and a named contact
• GetPassage can help you track which providers you've notified and what's still outstanding, keeping the admin from becoming unmanageable

You don't need to rush. Most of this work happens after probate is granted, and providers are generally understanding about timescales.

Key Points to Remember

• ISAs lose their tax-free status at death, but there's a grace period
• Surviving spouses get an additional ISA allowance (APS) equal to the deceased's holdings
• Shares get a CGT-free uplift to date-of-death value
• Premium Bonds stay in the draw for 12 months
• Most providers need the grant of probate before releasing assets
• Transferring investments "in specie" to beneficiaries can be more tax-efficient than cashing in

The financial side of losing someone is rarely straightforward, but taking it step by step makes it manageable. Start by finding out what's there, then work through each provider one at a time.