Receiving an inheritance often raises a very practical question: "Can I just put it into my ISA?" It's a smart instinct — ISAs are simple, tax-free, and familiar.
The rules are straightforward, but the £20,000 cap means most inheritances need a slightly bigger plan.
Quick answer
How do I put an inheritance into an ISA?
- 1
Check your remaining ISA allowance for this tax year (£20,000 maximum, less anything you've already paid in).
- 2
Decide between a Cash ISA (short-term, FSCS-protected) and a Stocks & Shares ISA (5+ years, market-linked).
- 3
Subscribe up to the remaining limit before 5 April — unused allowance does not roll over.
- 4
Hold the rest in an FSCS-protected savings account or general investment account.
- 5
On 6 April each year, move another £20,000 into the ISA — the standard 'Bed and ISA' approach.
- 6
If married, mirror the same plan with your spouse to shelter £40,000 a year as a couple.
The key rules in plain English
- £20,000 limit. Per adult, per tax year (6 April – 5 April).
- Use it or lose it. Unused allowance does not carry forward.
- One of each type per year. You can split the £20,000 across Cash, Stocks & Shares, Innovative Finance and Lifetime ISAs.
- Tax-free for life. Once inside an ISA, growth and withdrawals are free of UK income tax and capital gains tax.
- No impact on the inheritance itself. The estate has already been settled — putting money into an ISA doesn't change any inheritance tax position.
Cash ISA vs Stocks & Shares ISA
| Type | Best for | Time horizon | Risk |
|---|---|---|---|
| Cash ISA | Money you may need soon | 0–5 years | Very low (FSCS-protected to £85,000) |
| Stocks & Shares ISA | Long-term growth | 5+ years | Market risk — value fluctuates |
| Lifetime ISA | First home or retirement (under 40) | 5+ years | Withdrawal penalty if misused |
| Junior ISA | Passing money to a child | Until age 18 | Depends on Cash or S&S choice |
Here's what most people don't realise
The £20,000 cap isn't really a limitation — it's a planning prompt. For an inheritance of £100,000+, a typical UK approach looks like this:
- £20,000 into your ISA this tax year.
- £20,000 into your spouse's ISA (if applicable).
- The rest held in FSCS-protected savings or a general investment account.
- Move another £20,000 (each) into the ISA on 6 April every year.
Over 4–5 years, a couple can move £160,000–£200,000 of inherited money into a tax-free wrapper without ever bending a rule.
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See what people in your situation usually doWhat people typically do
- Pause first. Park everything in an FSCS-protected savings account for 30–90 days.
- Fill this year's ISA. Use the full £20,000 allowance before 5 April.
- Top up a pension. For higher-rate taxpayers, pension contributions can be more tax-efficient than an ISA.
- Plan the runway. Schedule annual ISA top-ups for the next few years.
- Keep an emergency cushion. 6–12 months of expenses outside any investment wrapper.
Top 5 risks to be aware of
- Rushing into a Stocks & Shares ISA. If you might need the money within 5 years, market dips can hurt.
- Forgetting the deadline. The allowance resets at midnight on 5 April — unused capacity is gone.
- Holding too much in cash. Inflation quietly erodes large cash balances over time.
- Ignoring pensions. For some people, a SIPP gives a bigger tax break than an ISA.
- Picking the wrong ISA provider. Platform fees and fund charges can quietly cost thousands over a decade.
An example scenario
Rachel, 52, inherits £140,000 from her father. She's married, no mortgage, both higher-rate taxpayers.
- £20,000 into her Stocks & Shares ISA.
- £20,000 into her husband's Stocks & Shares ISA.
- £40,000 into her SIPP (with higher-rate tax relief).
- £20,000 in an easy-access FSCS-protected savings account as an emergency buffer.
- £40,000 in a general investment account, ready to "Bed and ISA" over the next 1–2 tax years.
Within 24 months, almost all of Rachel's inheritance is inside tax-free or tax-advantaged wrappers — without breaking any rules or paying for complex advice.
What people regret later
The two most common regrets: leaving £100k+ in a low-interest current account "until they decide", and putting money they needed within 2 years into a Stocks & Shares ISA right before a market dip. Matching the wrapper to your timeline matters more than the wrapper itself.
For the broader picture, see the complete guide to what to do with an inheritance and how to build an investment plan.
What this means for you
An ISA is almost always part of the answer for an inherited lump sum — rarely the whole answer. Use this year's allowance, plan next year's, and keep the money you can't yet shelter somewhere safe and accessible in the meantime.
Simple next steps
- Check how much of your £20,000 ISA allowance you've already used this tax year.
- Decide your time horizon: under 5 years (Cash) or 5+ years (Stocks & Shares).
- Open or top up the right ISA before 5 April.
- Park the rest in an FSCS-protected savings account while you plan.
- If you're a higher-rate taxpayer, compare ISA vs pension before committing.
- For sums over £100,000, line up a one-off conversation with an FCA-regulated adviser — see speak to an adviser.
Educational · UK-focused
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