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Are ISAs subject to Inheritance Tax?

Tax | Inheritance Tax Helpful? 10

Asked by talmangalis, submitted 09 April 2011.

Open Quote Are ISAs subject to Inheritance Tax?End Quote

Answered by Justin on 11 April 2011

Yes, in so far as they will form part of the deceased's estate.

The ISA 'wrapper' ceases on the date of death. And while there is no income or capital gains tax payable up until that point, the underlying savings or investments will form part of the deceased's estate.

Any investments that were held within the ISA may be sold or transferred to beneficiaries, but either way there's no escaping inheritance tax if the overall estate is greater than the prevailing nil rate band (currently £325,000).

In general the only way to avoid inheritance tax is to give away assets and live for at least 7 years afterwards. This is not particularly practical with ISAs as the tax 'wrapper' can't be transferred to another person, so gifting away the contents of your ISA(s) means losing the tax benefits forever.


Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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