Since April 2015, if your husband, wife or civil partner dies you can inherit their ISA savings as a one-off additional ISA allowance.
The value of the allowance is equal to the value of the ISA savings held by your deceased husband, wife or civil partner. It effectively means you’re able to keep these savings as ISAs and therefore tax-free – even if you’ve already used up your own ISA allowance for that tax year.
If there’s no surviving spouse or civil partner (for example, if the inheritance goes straight to children or other relatives), ISA savings pass to the estate but lose their ISA ‘tax wrapper’. ISA savings are also subject to Inheritance Tax under the same rules as the rest of the estate.
Since April 2018, all ISAs apart from Junior ISAs, can continue to grow in value, tax free, for three years and one day from the date of death. For example, any interest earned after the date of death but before the probate process completes would remain tax free (as long as probate completes within the three-year limit).