Losing a partner is one of life’s hardest moments, and the last thing anyone wants to think about is money. Yet, in the midst of grief, a little-known financial opportunity might be waiting—one that could secure your future without a hefty tax bill. Imagine inheriting not just your spouse’s savings but also their tax-free Individual Savings Account (ISA) allowance, potentially worth tens of thousands of pounds. It’s a provision many couples overlook, yet it can make a huge difference. Let’s dive into how this works, why it matters, and what you should do with such an inheritance to make it work for you.
The Power of ISA Inheritance for Couples
When a loved one passes away, their financial legacy can provide a lifeline. For married couples or civil partners, the UK’s tax system offers a unique benefit called the Additional Permitted Subscription (APS). This isn’t just about inheriting money—it’s about inheriting the ability to shield that money from taxes, which can be a game-changer for your financial planning. But how exactly does it work, and why is it becoming more popular?
What Is the Additional Permitted Subscription?
The APS is a special tax break designed for legally partnered couples. If your spouse or civil partner passes away, you don’t just inherit their ISA savings—you also get their ISA allowance. This means you can place the inherited amount into your own ISA, tax-free, without eating into your standard annual ISA limit (set at £20,000 for the 2025/2026 tax year). The APS is calculated based on the value of the deceased’s ISA either at the time of death or when probate is finalized—whichever is higher.
The APS can protect significant sums from tax, giving surviving partners a rare chance to boost their savings.
– Financial planning expert
Here’s an example to make it clear: if your partner had £60,000 in an ISA when they passed, you could add that entire amount to your own ISA, plus your usual £20,000 allowance, for a total of £80,000 in tax-free savings for that year. That’s a massive opportunity to grow your wealth without HMRC taking a cut. But, as with anything tax-related, there’s paperwork involved, and the process isn’t always intuitive.
How to Claim Your Partner’s ISA Allowance
Claiming the APS isn’t as daunting as it sounds, but it does require some legwork. You’ll need to contact the ISA provider of your deceased partner and provide details about their account, your relationship, and documents like the grant of probate. Most providers have straightforward application forms, but the process can vary slightly depending on whether the ISA was a cash ISA or a stocks and shares ISA.
- Contact the ISA provider promptly to start the process.
- Submit proof of your relationship (marriage or civil partnership certificate).
- Provide the grant of probate or death certificate as required.
- Decide whether to transfer the assets into your existing ISA or open a new one.
One handy option is a transfer in specie, where investments are moved directly into your ISA without being sold. This avoids potential market losses or fees, but you should always check the provider’s terms for any hidden costs. In my experience, couples who plan ahead—discussing their ISAs while both are still around—find this process far less stressful.
Why ISA Inheritance Is on the Rise
Recent trends show a surge in people taking advantage of the APS. Financial experts report a 33% increase in ISA inheritances over the past year, with numbers doubling over two years. Why the boom? For one, more couples are aware of this tax break, thanks to better financial education. Plus, with rising living costs, people are looking for every possible way to maximize their savings. The APS offers a rare chance to preserve wealth without the taxman’s interference, making it a hot topic for savvy couples.
But here’s where it gets tricky: inheriting an ISA doesn’t mean you should automatically keep it as is. Your partner’s investment choices might not suit your goals, and holding onto them blindly could lead to missed opportunities—or worse, financial missteps.
Should You Keep or Sell the Inherited Investments?
Inheriting an ISA is like being handed a toolbox—it’s only useful if you know how to use the tools inside. Your late partner’s investments were likely tailored to their financial goals, risk tolerance, and timeline. Those might not align with yours. For example, if they were chasing long-term growth but you need income now, holding onto their portfolio could leave you short-changed.
Reviewing inherited investments is crucial. They might not match your current needs or risk appetite.
– Wealth management advisor
Data shows that nearly half of people who inherit ISAs don’t touch the investments for at least a year. Meanwhile, about 15% sell or trade within two weeks. Neither approach is inherently wrong, but both carry risks. Selling too soon might mean acting out of panic or unfamiliarity with investing, while holding on too long could lock you into a strategy that doesn’t serve you.
The Risks of Rushing In—or Doing Nothing
Let’s talk about the dangers of acting too fast. Selling investments without a clear plan can backfire. For instance, switching from income-generating assets to cash might seem safe, but if you’re drawing the same income as before, you could deplete your savings faster than expected. I’ve seen people make this mistake, thinking cash is always the “safe” option, only to realize they’ve lost growth potential.
On the flip side, doing nothing carries its own risks. About half of ISA inheritors stick with their partner’s portfolio, sometimes out of loyalty or fear of making the wrong move. But what if those investments were high-risk, and you’re more conservative? Or what if they were chosen years ago and no longer perform well? A simple review can save you from these pitfalls.
How to Review an Inherited ISA Portfolio
Reviewing an inherited portfolio doesn’t mean you need to become a stock market guru overnight. It’s about asking the right questions and aligning the investments with your needs. Here’s a step-by-step guide to get you started:
- Assess your goals: Are you looking for growth, income, or a mix of both?
- Check the investments: Are they stocks, bonds, or funds? Do they match your risk tolerance?
- Evaluate performance: Have the assets grown, or are they underperforming?
- Consider fees: Are you paying high management fees that eat into returns?
- Get advice if needed: A financial advisor can provide clarity, especially if investing feels overwhelming.
Perhaps the most interesting aspect is how couples can prepare for this scenario while both are still around. Having open conversations about your ISAs, pensions, and financial goals can make the transition smoother. It’s not exactly romantic dinner talk, but it’s a practical way to show you care about each other’s future.
Planning Ahead as a Couple
Money isn’t just about numbers—it’s about your shared dreams and security. Couples who discuss their finances openly are better equipped to handle inheritance scenarios. Here’s a quick table to help you start those conversations:
| Topic | Why It Matters | Questions to Ask |
| ISA Holdings | Understand what’s in each partner’s ISA. | What assets are held, and why were they chosen? |
| Risk Tolerance | Align investments with both partners’ comfort levels. | Are we okay with high-risk or low-risk options? |
| Financial Goals | Ensure investments support shared objectives. | Are we saving for retirement, travel, or something else? |
These discussions don’t just help with ISA inheritance—they build trust and clarity in your relationship. I’ve always found that couples who tackle money matters together feel more confident, no matter what life throws their way.
When to Seek Professional Help
Not everyone feels comfortable diving into investment portfolios, and that’s okay. If the idea of reviewing stocks or funds makes your head spin, a financial advisor can be a lifesaver. They can help you understand your inherited ISA, align it with your goals, and avoid costly mistakes. Look for advisors who charge transparent fees and have a track record of working with couples or bereaved partners.
A good advisor doesn’t just manage money—they give you peace of mind.
– Personal finance specialist
That said, don’t feel pressured to hire someone right away. Take your time to grieve and reflect. The APS allowance doesn’t expire immediately, so you have some breathing room to make informed decisions.
Common Mistakes to Avoid
Inheriting an ISA is a privilege, but it comes with pitfalls. Here are some mistakes to steer clear of:
- Rushing to sell: Panic-selling can lock in losses or disrupt a solid strategy.
- Ignoring fees: High platform or fund fees can erode your returns over time.
- Assuming it’s one-size-fits-all: Your partner’s investments might not suit your needs.
- Neglecting tax rules: Misunderstanding the APS could lead to unexpected tax bills.
By taking a measured approach, you can turn an inherited ISA into a powerful tool for financial security. It’s not just about the money—it’s about honoring your partner’s legacy while building your own future.
Final Thoughts: Turning Loss into Opportunity
Inheriting your partner’s ISA is more than a financial transaction—it’s a chance to carry forward their hopes for your shared future. The APS tax break is a rare gift, letting you shield significant sums from taxes. But it’s not a set-it-and-forget-it deal. By reviewing the investments, aligning them with your goals, and seeking advice when needed, you can make the most of this opportunity.
Maybe the real lesson here is about preparation. Couples who talk openly about money, from ISAs to pensions, are better positioned to navigate life’s challenges. It’s not always easy to start those conversations, but they’re worth it. After all, isn’t that what partnership is about—planning for the best, even in the toughest moments?
What’s your take? Have you and your partner discussed your financial plans, or are you navigating an inherited ISA now? The key is to approach it with care, clarity, and a bit of courage.
