Inheritance Tax on Savings UK (2026): Cash, Bank Accounts & Investments

Yes — cash savings held in bank accounts, building society accounts, NS&I products, and premium bonds are included in the taxable estate at their date-of-death value. Savings are among the most straightforward assets to value for IHT — the executor requests a date-of-death balance from each institution. IHT is charged at 40% on the combined value of all estate assets (savings + property + investments + personal possessions) above the nil-rate band (£325,000) and any available residence nil-rate band. There are no special exemptions for cash savings — they are treated the same as any other estate asset.

Yes — ISA (Individual Savings Account) balances are fully included in the estate for IHT purposes. The ISA wrapper provides income tax and capital gains tax advantages during the account holder's lifetime, but it offers no IHT advantage. On death, the ISA becomes part of the estate and is valued at the date-of-death market value. However, a surviving spouse or civil partner can inherit an ISA as an Additional Permitted Subscription (APS) — they receive a one-off additional ISA allowance equal to the value of the deceased's ISA, allowing them to keep the tax-efficient wrapper. The APS does not reduce IHT; it simply allows the surviving partner to maintain the ISA treatment on inherited funds. Premium bonds, cash ISAs, stocks and shares ISAs, and innovative finance ISAs are all included in the IHT estate.

Yes — Premium Bond holdings are included in the taxable estate at their face value (not at any unrealised prize potential). Premium Bonds do not themselves attract IHT relief. When the holder dies, Premium Bonds can be kept in place and continue to be entered in prize draws for up to 12 months after the date of death — they are still valued at face value for IHT. The executor can cash them in or transfer them to a beneficiary. NS&I also offers other products (Fixed Interest Savings Certificates, Index-Linked Savings Certificates, Income Bonds) which are all similarly included in the estate at their encashment value.

Listed shares and unit trusts are valued at the 'quarter-up' price for IHT purposes: the lower of (a) the date-of-death closing price + 25% of the difference between the opening and closing price, or (b) the average of the opening and closing prices. HMRC publishes official valuation tables. Investment portfolios (ISAs, SIPPs, GIAs) are valued at the date-of-death market price of each holding. Unlisted shares in private companies are valued using HMRC's specialist Shares and Assets Valuation team — this can take several months. Investments held in a SIPP or personal pension do not currently count toward the estate for IHT (until April 2027), but a Stocks and Shares ISA does.

Six strategies reduce IHT on savings: (1) Use the annual gift exemption (£3,000 per year, plus carry-forward) and small gift exemption (£250 per person, unlimited recipients) to give cash to family tax-free. (2) Make potentially exempt transfers (PETs) — gifts that become IHT-exempt if you survive 7 years. (3) Normal expenditure from income — regular gifts from surplus income are immediately IHT-exempt with no 7-year rule (requires keeping records). (4) Write life insurance in trust — policy proceeds are outside the estate. (5) Charitable legacies — leaving 10%+ of the net estate to charity reduces the IHT rate to 36%. (6) Invest in IHT-efficient assets — Business Property Relief (BPR) qualifying investments (AIM shares, EIS) can qualify for IHT relief after 2 years, subject to the new April 2026 cap of £2.5m per person.

For IHT purposes, jointly held accounts are treated according to their beneficial ownership — usually 50/50, or whatever proportion reflects the actual contributions. When one account holder dies, their share of the account passes to the surviving holder by right of survivorship (outside the will) and is included in the deceased's estate at their proportionate share value. For example, if a joint account has £100,000 and both partners contributed equally, £50,000 is included in the deceased's estate. If one partner contributed all the funds, the entire account may be treated as their asset. The spouse exemption applies to a deceased spouse's share passing to a surviving UK-domiciled spouse — so joint account transfers between spouses are typically IHT-exempt on the first death.

Savings and cash are treated the same as any other estate asset for IHT — taxed at 40% above the available nil-rate bands, payable before the Grant of Probate. IHT on property has a key difference: it can be paid in 10 annual instalments (with interest), allowing executors to avoid selling the property immediately. Cash savings cannot be paid in instalments — IHT on savings must be paid in full before the Grant. This creates a practical difference: if most of the estate is illiquid (tied up in property), the executor may need to use the HMRC Direct Payment Scheme to release savings from bank accounts directly to HMRC before probate. This avoids the need to sell assets before the Grant is issued.