Courtiers Wealth Management
Courtiers Wealth Management

News & Insights

The Continuous ISA: tax-efficient ISA gains for the widowed

By Steve Hudson
20 Feb 2018
Article image

Since 6th April 2015, any ISA gains accumulating following the death of the account holder have been subject to tax. In the new tax year, this will change.

New legislation means that when an ISA holder dies on or after 6th April 2018 (the start of the new tax year), any subsequent gains in the deceased’s existing ISAs will be designated a “Continuing account of a deceased investor”, or “Continuous ISA”, which retains the ISA’s tax-advantageous wrapper for up to three years.

Three more years tax-free

A Continuing ISA will keep gains within a tax efficient ISA wrapper for up to three years following the date of the investor’s death. Any growth during this period, either by addition of interest in cash ISAs or through fund growth in Stocks & Shares ISAs, will be exempt from tax.

A Continuous ISA remains effective until the formal closure of the deceased’s estate, usually by Grant of Probate (the completion of the administration of the deceased’s estate). If it is still effective on the third anniversary of the investor’s death and the account has not been closed, the account will cease to be a Continuing ISA. In these circumstances, the ISA Manager must remove the ISA wrapper on the next working day and all subsequent income and/or gains will then become taxable in the hands of the estate.

A step forward

Since 6th April 2015, the ISA Additional Permitted Subscription (APS) has allowed spouses and civil partners to benefit from an additional ISA allowance based on the value of the deceased’s ISA at the time of death. However, an anomaly in the APS rules has meant that any growth in the value of the ISA between the date of death and the formal closure of the deceased’s estate is subject to tax. Closure of a deceased’s estate can take several months and sometimes longer for more complicated estates, leaving potential for taxes to accumulate in the process.


As specified now, to qualify, the deceased investor and the surviving spouse or civil partner must have been living together at the date of death. They cannot be separated under a court order, under a deed of separation or ‘in circumstances where the marriage or civil partnership has broken down’.

Rules & restrictions

Where the ISA investor dies on or after 6th April 2018, the APS can be either the value of the deceased investor’s ISA at the date of death or the value of the ISA at the point that the ISA ceases to be a Continuing ISA, whichever is the higher. But whichever choice is made, this must apply to all ISAs belonging to the deceased investor with all other providers.

Once the Continuous ISA takes effect, no further subscriptions can be made and accounts cannot be transferred to another ISA manager. For cash ISAs, the flexible ISA rules will not apply.

Changes are set to apply to all ISA account types except Junior ISAs.

Where it started

In the 2015 Autumn Statement, George Osborne announced plans for ISA accounts to retain their tax-advantaged status following the death of the account holder. Draft regulations were published in February 2017.

A consultation period followed and proposed amendments were put before Parliament in the autumn of 2017. Finally, amendments were approved and the new legislation allowed to come into force on 6th April 2018.

Preparing for change

It’s our job to ensure we, and you, are aware of legislative changes that could have positive implications as part of your financial planning strategy. As well as planning and implementing these strategies, personal advisers are able to assist with various aspects of financial planning as clients adjust to changing (and at times challenging) circumstances.

To find out whether Courtiers can help with your personal tax circumstances and/or other financial ambitions, please speak to your adviser or contact us.

Tax treatment depends on individual circumstances and may be subject to change in the future.

Warning – the views expressed by Courtiers in this summary and any video and video transcripts, are reached from our own research. Courtiers cannot accept responsibility for any decisions taken as a result of reading this document, watching the featured video or reading the video transcript and investors are recommended to take independent professional advice before effecting transactions. The price of stocks, shares and funds, and the income from them, may fall as well as rise. Past performance is not necessarily a guide to future returns.

We do not endorse nor accept responsibility for the content of any website not operated by Courtiers which you may visit by following a link from this article.

Share Article

Subscribe to News & Insights

This field is for validation purposes and should be left unchanged.