Cash ISA Estate Planning: APS and Inheritance Tax

There is no single best cash ISA for estate planning, and this page lists no rates. A surviving spouse or civil partner can add an extra amount to their own ISAs after a death, but the GOV.UK guidance for ISA managers says managers do not have to accept it. Ask the provider before you apply.

Tax year 2026/27. Last reviewed 27 October 2026.

For what happens to the ISA of the person who died, see our guide to how ISA inheritance works.

Table of Contents

What is the extra ISA allowance after a spouse dies?

If your spouse or civil partner dies, you can add a tax-free amount to your own ISAs on top of your normal allowance. The GOV.UK ISA guide says the amount can be up to the value they held in their ISA when they died or when it is closed. HMRC calls it an additional permitted subscription, or APS.

You and the person who died must have been living together at the date of death. The allowance is separate from the money itself: the guidance says an APS is available whether or not you inherited the ISA assets. It can go into a cash ISA. It cannot be paid into or out of a Junior ISA.

The rules depend on when the person died (GOV.UK ISA guide):

On or after 6 April 2018: their ISA becomes a continuing account of a deceased investor. It stays tax-free until it closes, and no new payments can go in.
Between 3 December 2014 and 5 April 2018: their ISA ended on the date of death, and you can add up to the value they held.
Before 3 December 2014: you cannot inherit their ISA allowance.

Does the cash ISA provider have to accept an APS?

No. The guidance says ISA managers are not obliged to accept additional permitted subscriptions. You can pay one to the manager that holds the ISA of the person who died, or to another manager that agrees to accept it. So the first check on any cash ISA is whether the provider takes an APS at all.

Questions worth putting to a provider before you commit:

Will you accept an APS from me if my spouse or civil partner held their ISA with another manager?
Will you accept more than one payment up to my limit? The guidance says a manager that accepts only one should say that any unused balance will be lost.
Will you open a new ISA for the APS? The guidance says managers can insist on this to help track the limit.

Two rules in the guidance affect the choice. Once an APS has been made, any further payments up to the limit must go to the same manager, and any unused balance cannot be used with another manager. And if the person who died held ISAs with several managers, you have an APS limit with each manager.

How long do I have to use the extra allowance?

The guidance for ISA managers gives two time limits. A cash payment must be made within 3 years of the date of death or, if that is later, within 180 days of the completion of the administration of the estate. Non-cash assets passed across as they stand must be paid in within 180 days of you becoming beneficially entitled to them.

What will the new provider ask for?

Before the first payment, the guidance says you must give the provider details of the person who died: their name and permanent address, their dates of birth and death, their National Insurance number if known and who managed their ISA. You also give the date of the marriage or civil partnership. You declare that you were living together at the date of death and that the payment is within the time limits. The manager that held their ISA then has 30 calendar days from receiving the new manager’s notice to confirm the value, and that period can pause until a death certificate arrives.

Is an ISA still part of the estate for Inheritance Tax?

Yes. The GOV.UK ISA guide says ISA investments form part of your estate for Inheritance Tax purposes. There is no Income Tax or Capital Gains Tax to pay on the ISA of someone who has died until it closes, but the value still counts.

The GOV.UK Inheritance Tax guide says there is normally no tax to pay if the estate is below the £325,000 threshold, or if everything above it goes to a spouse or civil partner, or to a charity. The standard rate is 40% on the part of the estate above the threshold.

Example with assumed figures, which are not a forecast: an estate of £600,000 includes a £150,000 cash ISA and everything goes to the person’s children. Assume the only threshold is £325,000, with no transferred threshold and no relief for a home. Inheritance Tax is 40% of £275,000, which is £110,000. Without the ISA the estate is £450,000 and the tax is 40% of £125,000, which is £50,000. The ISA adds £60,000 to the bill, which is 40% of £150,000.

How much of a cash ISA is protected if a bank fails?

A cash ISA is a bank or building society account, so the Financial Services Compensation Scheme (FSCS) protects it up to £120,000 for each eligible person at each bank or building society. The limit rose to £120,000 on 1 December 2025. Banks that share a banking licence count as one bank, so the limit applies to the total you hold across them.

Another example with assumed amounts: you already hold £30,000 with a bank and pay a £150,000 APS into a cash ISA with the same bank. That is £180,000 in one place, so £60,000 is above the £120,000 limit. An unused APS balance cannot go to another manager, so add up what you hold at a bank before you choose where the APS goes.

Does the April 2027 cash ISA limit change anything?

From 6 April 2027, SI 2026/1018 sets a £12,000 yearly limit on payments into cash ISAs for people aged 64 or under at the end of the tax year. The overall ISA limit stays at £20,000. The regulations do not mention additional permitted subscriptions, so this page cannot say whether an APS counts towards that limit. Ask the provider. Our post on the April 2027 change for over-60s explains the age test.

Which cash ISA should I choose?

Rates change often and we list none here. The provider’s own terms decide whether an account can take an APS at all, so check those first. Our post on fixed-rate cash ISAs covers that type of account, and using your £20,000 ISA allowance covers the normal yearly limit.

Frequently asked questions

Can I pay my extra ISA allowance into a different provider’s cash ISA?

Yes, if that provider agrees. The guidance for ISA managers says you can make the payment to the manager that holds the ISA of the person who died or to another manager that agrees to accept it. Managers are not obliged to accept it, so ask before you apply.

Can I split the extra allowance across several providers?

Not freely. The guidance says that once an APS has been made, further payments up to the limit must go to the same manager, and any unused balance cannot be used with another manager. If the person who died held ISAs with several managers, you have a limit with each.

How long do I have to use the extra allowance?

For cash, the guidance gives 3 years from the date of death or, if later, 180 days from the completion of the administration of the estate. Assets passed across as they stand have a separate limit of 180 days from when you became beneficially entitled to them.

Does a cash ISA keep money out of Inheritance Tax?

No. The GOV.UK ISA guide says ISA investments form part of your estate for Inheritance Tax purposes. There is no Income Tax or Capital Gains Tax to pay on a deceased person’s ISA until it closes, but the value still counts when the estate is worked out.

Is money in a cash ISA covered by the FSCS?

A cash ISA is a bank or building society account, so the FSCS protects up to £120,000 per eligible person, per bank. Banks that share a banking licence count as one bank, so the limit applies to the total you hold across them.