Your Partner Cannot Inherit Your ISA Allowance

You can inherit your partner's ISA money if their will leaves it to you. What you cannot inherit, because you were not married, is the tax shelter around it. The special allowance that lets a bereaved partner keep a deceased person's ISA savings tax-free, called the additional permitted subscription, is written for spouses and civil partners only. A cohabiting partner, however long you lived together, does not get it.

That distinction sounds technical, but it decides real money. When a married person dies, the survivor can shelter an extra amount equal to the whole value of the deceased's ISA on top of their own annual allowance, keeping that pot growing free of tax on income and gains for the rest of their life. When an unmarried person dies, their partner inherits the cash, if the will provides for it, but has to start again inside their own ordinary allowance, exposing everything above it to tax in the years that follow. Same relationship, same savings, a worse outcome purely because there was no marriage or civil partnership.

This page sets out exactly what an unmarried partner loses when it comes to inheriting an ISA, what the account itself does in the months after a death, and what an unmarried couple should put in place instead so the savings actually reach the survivor without being eaten by tax and delay.

The short answer: the money can pass to you, the allowance cannot

An ISA, an Individual Savings Account, is a wrapper that keeps your savings or investments free of income tax and capital gains tax. While you are alive it does that quietly in the background. The complication arrives at death, because the tax treatment of the account and the question of who inherits the money are two separate things, and marriage changes one of them.

If your partner names you in their will as the person who inherits their ISA, the money is yours once the estate is administered. That part does not depend on marriage. What depends on marriage is whether you can carry that money forward inside a tax shelter of your own. A surviving spouse or civil partner gets a one-off extra ISA allowance to do exactly that. You, as a cohabiting partner, do not, so anything you inherit sits in your ordinary savings from then on, and any growth or interest above your own allowances is taxable like any other money.

This is one item on a long list of things that do not pass automatically to an unmarried partner. If you have not yet checked how your home would pass, the companion question of whether you should be joint tenants or tenants in common is the one that decides whether the roof over your head follows the same unhappy pattern.

What the additional permitted subscription is, and who gets it

The additional permitted subscription, usually shortened to APS, was introduced so that a bereaved husband, wife or civil partner would not lose the tax advantage their partner had built up. It gives the survivor an extra ISA allowance equal to the value of the deceased's ISA holdings, in addition to their own yearly allowance. In practice it means the survivor can put a sum matching the deceased's ISA into their own ISA and carry on sheltering it from tax, even though that money is well above what anyone can normally pay in during a single year.

The standard annual ISA allowance is £20,000 a year. The APS sits on top of that, which is why it matters so much: it can be many times the size of an ordinary year's allowance, depending on how much the deceased had saved.

Source: GOV.UK, Individual Savings Accounts (ISAs) guidance, published under the Open Government Licence v3.0.

The catch, for the purpose of this page, is the eligibility. The APS is available only to a person who was the deceased's spouse or civil partner and was living with them at the date of death, in the sense of not being separated under a court order, a deed of separation, or in circumstances likely to become permanent. It is deliberately closed to cohabiting partners. There is no version of it for couples who lived together but never formalised the relationship, no matter how long, how committed, or how financially entwined.

What the ISA itself does when someone dies

The account does not simply collapse on the day of death. For deaths from April 2018 onwards, an ISA becomes what the rules call a continuing account of a deceased investor. During that period the savings keep their tax-free treatment on interest, dividends and growth, which stops the survivor and the estate being taxed while everything is being sorted out.

That protected status is not permanent. It lasts until the earliest of three events: the administration of the estate is completed, the ISA is closed by the personal representatives, or three years have passed since the death. Whichever comes first ends the shelter, and from that point the money is treated like any other holding in the hands of whoever now owns it. During the continuing-account period, no new money can be paid into the ISA; it can grow, but it cannot be added to.

None of this changes the fact that the value of the ISA still counts as part of the deceased's estate for inheritance tax. The wrapper protects income tax and capital gains tax, not inheritance tax. So the ISA is valued as at the date of death and added to everything else the person owned when the estate's tax position is worked out.

What a cohabiting partner actually loses

It helps to separate the two things a cohabitee misses, because they are different sizes of problem.

The first is the lost shelter. Without the APS, whatever you inherit has to live inside your own annual allowance from then on. If your partner had built a substantial ISA over many years, you cannot replicate that shelter in a single step the way a spouse can. The savings are still yours, if the will gives them to you, but their future growth is now exposed to tax that a married survivor would have avoided.

The second, and often the more urgent, is access and timing. A cohabiting partner inherits only what the will provides, and only once the estate has been administered, which takes months. If there is no will, the position is worse still: the intestacy rules give an unmarried partner nothing, so the ISA passes to the deceased's blood relatives and you may receive none of it at all. A married survivor at least inherits under intestacy; you do not. This is the same automatic exclusion that runs through pensions and state benefits, which is why it is worth reading how a partner cannot inherit a State Pension and how workplace schemes treat you, covered in our guide to being unmarried when there is a death-in-service benefit.

The inheritance tax point unmarried couples miss

There is a further, larger trap sitting behind the ISA question, and it applies to the whole estate rather than just the savings. Married couples and civil partners can leave everything to each other free of inheritance tax under the spouse exemption. Cohabiting partners cannot. Anything your partner leaves you counts against their nil-rate band, and once that is used up, the excess is taxed before you receive it.

That means an unmarried survivor can face a genuine double blow: no APS to keep the ISA sheltered, and no spouse exemption to stop the estate being taxed. The savings you were relying on can be reduced by a tax bill that a married couple in the identical position would never have paid. Some workplace and pension arrangements can also treat an unmarried partner differently on the say-so of a single form, and if yours has an in-house scheme it is worth checking whether the choice between a life interest trust and life cover would serve the survivor better than leaving assets outright.

What an unmarried couple should do instead

You cannot manufacture the APS or the spouse exemption without marrying or entering a civil partnership. What you can do is make sure the money reaches the survivor at all, arrives quickly, and has been sized with the tax in mind. Three things carry most of the weight.

Make wills. This is not optional for an unmarried couple. Without a will, the survivor inherits nothing under the intestacy rules, ISA included. A will is what turns "you get nothing" into "you get the savings".

Hold life cover written in trust. A policy written in trust for your partner pays out to them directly, outside the estate and without waiting for probate, so cash is in their hands within weeks rather than after months of administration. Because there is no spouse exemption, the sum insured can be set to allow for the inheritance tax the estate will owe, so that the tax does not come out of the savings you meant them to keep. Making sure the right person actually benefits is a step in its own right, set out in our guide to ensuring your partner really does receive your life insurance.

Check every nomination and beneficiary form. Pensions, workplace benefits and some savings products pass by nomination rather than by will, and an out-of-date form is a common way for money to go to the wrong person. If you want a broker to price cover sized against your savings and the likely tax, you can get life insurance quotes and have an FCA-authorised broker do the sums.

Scotland and Northern Ireland

ISAs are a UK-wide tax matter set by HM Revenue and Customs, so the rules on the additional permitted subscription and the continuing-account status are the same wherever in the UK you live. A cohabiting partner is excluded from the APS in Edinburgh and Belfast exactly as in Cardiff and London.

What differs is what happens to the money if there is no will, because inheritance on death is not a reserved matter. In Scotland, a surviving cohabitant can apply to the court under the Family Law (Scotland) Act 2006 for a payment from an estate where the partner died without a will, but the window is only six months from the death and the outcome is discretionary. In Northern Ireland, the intestacy and family provision rules sit in separate legislation again. In every jurisdiction the reliable protections are the same: a will that names you, and cover that reaches you fast. The wider set of gaps unmarried couples face is drawn together in our guide to dependants and unusual family shapes.

Frequently asked questions

Can I inherit my partner's ISA if we were not married?

You can inherit the money if the will leaves it to you, but not the tax wrapper. The additional permitted subscription, which lets a survivor pay in an extra amount matching the deceased's ISA and keep it sheltered, is available only to a spouse or civil partner who was living with them at the death. A cohabiting partner cannot claim it, so anything you inherit sits in your ordinary savings and its future growth is taxable.

What happens to the ISA itself when someone dies?

It becomes a continuing account of a deceased investor and keeps its tax advantages until the administration of the estate finishes, the account is closed, or three years have passed, whichever comes first. No new money can be paid into it during that time, and its value still forms part of the estate for inheritance tax, because the wrapper shelters income and gains, not inheritance tax.

What should an unmarried couple do instead?

Make wills, so the savings reach each other at all, and hold life cover in trust so cash arrives without waiting for probate. There is no spouse exemption from inheritance tax for cohabitees, so the sum insured should allow for the tax the estate will owe, and every pension and workplace nomination form should be checked and kept up to date, because those pass outside the will.