ISA Additional Permitted Subscription (APS) on Death: How Surviving Spouses Preserve the ISA Tax Wrapper
When a spouse dies with ISAs, the surviving partner gets a one-off Additional Permitted Subscription allowance equal to the deceased's ISA balance — preserving the income tax and CGT shelter on inherited funds. The APS does not reduce IHT, but it prevents the loss of the tax-free wrapper. It must be used within 3 years of death.
How the APS Works
What is the Additional Permitted Subscription (APS)?
When a person dies with ISAs (cash ISAs, stocks and shares ISAs, Lifetime ISAs, or Innovative Finance ISAs), their spouse or civil partner receives an Additional Permitted Subscription allowance. This is a one-off increase to the surviving spouse's ISA allowance equal to the total value of the deceased's ISA holdings at: (a) the date of death; or (b) the date the ISA account is closed (if later). The APS is in addition to the surviving spouse's normal annual ISA subscription limit (£20,000 per tax year). The APS can be used with the same ISA provider or a different provider, and does not have to be used within the same tax year as the death — subject to the overall time limit.
Does the APS reduce the IHT on the ISA assets?
No — the APS is an income tax and CGT benefit, not an IHT benefit. ISA assets are included in the deceased's estate for IHT in the same way as any other savings or investments — the ISA wrapper provides no IHT shelter during life or on death. The ISA assets will typically qualify for the spousal exemption if they pass to the surviving spouse (no IHT on the first death), but they form part of the surviving spouse's estate for IHT on the second death. The APS simply allows the surviving spouse to continue to hold the inherited funds in an ISA wrapper (sheltered from income tax on investment growth and dividends, and CGT on gains), rather than having to hold them as ordinary taxable investments.
Time limits for claiming the APS
The surviving spouse must use the APS allowance within: (a) 3 years from the date of death; or (b) 180 days after the completion of the administration of the deceased's estate — whichever is later. In practice, the 3-year deadline is the binding one in most cases. The APS does not have to be used all at once — it can be used in tranches, with different ISA providers, across multiple tax years, provided the overall APS allowance is not exceeded and the 3-year deadline is met. Some ISA providers have their own forms for claiming the APS — the surviving spouse should notify their own ISA provider (or a new provider) of the APS allowance they wish to use.
Inherited ISA (Continuing Bonds) vs APS
An inherited ISA (also called a Continuing Bonds ISA) is a separate mechanism that allows the deceased's ISA to continue as an ISA account after death while the estate is being administered — with the surviving spouse as the account holder during administration. The Continuing Bonds ISA maintains the ISA tax status on the deceased's funds during the administration period (before the APS is formally used). Once estate administration is complete, the funds from the Continuing Bonds ISA are transferred to the surviving spouse's own ISA using the APS. Not all providers offer Continuing Bonds ISAs — if the provider does not, the ISA reverts to an ordinary estate asset during administration and the APS is used when the funds are ultimately distributed to the surviving spouse.
Frequently Asked Questions
Can the APS be used if the surviving spouse already has their own ISA?
Yes — the APS is in addition to the normal annual ISA allowance. In the tax year of the spouse's death, the survivor can subscribe up to £20,000 (normal annual allowance) plus the full APS allowance into an ISA. The APS is not reduced by any normal ISA subscriptions made in the same tax year. Example: spouse dies in June 2026 with £150,000 in ISAs. The surviving partner has already subscribed £10,000 to their own ISA in 2026-27. They can still use the full £150,000 APS in addition — making a total ISA shelter of £160,000 in that tax year (£10,000 normal + £150,000 APS).
What is the IHT position on ISAs held at death?
ISAs are included in the deceased's estate for IHT at their full market value — cash ISAs at face value; stocks and shares ISAs at the market value of the investments on the date of death. The ISA wrapper provides no IHT shelter: the income tax and CGT advantages disappear on death (the ISA loses its tax-free status on death, though the APS allows the surviving spouse to restore a tax shelter for the inherited funds). Where ISAs pass to a surviving spouse or civil partner, the spousal exemption applies — no IHT on the first death. On the second death, the surviving spouse's total estate (including inherited ISA funds, whether held in their own ISA or not) is subject to IHT in the usual way.
Does the APS apply to all types of ISA?
The APS applies to: cash ISAs; stocks and shares ISAs; and Innovative Finance ISAs. The APS does not apply to Lifetime ISAs (LISAs) — the APS cannot be used to make additional contributions to a LISA (there is no APS mechanism for LISAs). Junior ISAs (JISAs) are not transferable on death in the same way — the JISA passes as part of the estate but the APS mechanism does not apply to JISAs. For Help to Buy ISAs (now closed to new subscriptions), the APS may apply to the balance — but specialist provider guidance is needed.
What happens if the surviving spouse does not use the APS?
If the surviving spouse does not use the APS within 3 years of the death (or 180 days after estate administration completes), the APS allowance lapses — it cannot be used after the deadline. The inherited ISA funds (distributed from the estate) are held by the surviving spouse as ordinary (non-ISA) assets, subject to income tax on interest and dividends and CGT on gains from the date of acquisition (probate value as base cost). For large ISA portfolios, the loss of the ISA wrapper on the inherited funds can be significant over time — particularly for investment portfolios generating substantial dividends or growth. Executors should alert the surviving spouse to the APS and the deadline as early as possible in the administration.
Can the APS be used with a different ISA provider from the deceased's?
Yes — the APS does not have to be used with the deceased's ISA provider. The surviving spouse can open a new ISA with any authorised ISA manager and apply their APS allowance there. Some providers are better set up to receive APS subscriptions than others. The surviving spouse should notify the ISA provider of the APS allowance being claimed and provide evidence of the deceased's ISA holdings (typically a statement or letter from the deceased's ISA manager). Some providers require specific APS forms. The APS can be split across multiple ISA managers — the surviving spouse simply needs to track the total APS used to ensure they do not exceed the allowance.
Does the APS interact with the Residence Nil Rate Band or other IHT reliefs?
No — the APS is purely an income tax and CGT mechanism. It has no effect on the IHT position — neither on the deceased's estate nor on the surviving spouse's future estate. The ISA assets in the surviving spouse's estate after the APS is used will be included in their estate for IHT in the usual way (subject to the NRB, RNRB, and any other applicable reliefs). The APS does not create any IHT shelter for the surviving spouse's estate — it only preserves the income tax and CGT shelter on the inherited funds. For IHT planning on the surviving spouse's estate, the usual tools apply: gifting, trust planning, BPR assets, etc.
Make Sure Your Spouse Knows About the APS — Put It in Your Will
Executors and surviving spouses often miss the APS deadline simply through not knowing it exists. Your will can direct your executors to notify your spouse of their APS entitlement promptly. Start with a WillSafe will kit — and ensure your estate plan covers the ISA wrapper as well as the IHT.
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