What happens to a Help to Buy ISA or Lifetime ISA when the holder dies? (UK)
18 August 2026 · Inherit Vault
These two accounts look like the same idea with different names, and they behave completely differently when the person saving into them dies. One pays out cleanly. The other loses its bonus altogether.
Lifetime ISA: the penalty doesn't apply
Normally, taking money out of a LISA for anything other than a first home or retirement costs you a 25% withdrawal charge. That's a bigger bite than it sounds, because it claws back more than the bonus you were given. On death that charge doesn't apply. The account stops being a LISA, the money forms part of the estate, and any government bonus already paid in stays where it is. So a LISA with £20,000 in it is worth £20,000 to the family, not £15,000.
Help to Buy ISA: the bonus needs a purchase that will never happen
A Help to Buy ISA bonus is only ever paid on completion of a property purchase, claimed through the buyer's conveyancer. No purchase, no bonus, and an estate can't complete one on behalf of somebody who has died. So the savings pass to the estate but the 25% top-up, which could be up to £3,000, simply doesn't get claimed. These accounts closed to new savers back in 2019, but plenty of people are still paying into ones they opened before then, and the money often sits forgotten.
The allowance most spouses never use
When an ISA holder dies, their husband, wife or civil partner gets an extra one-off ISA allowance. It matches the value of the ISAs, and it sits on top of their own annual allowance. It's called the additional permitted subscription, and it means the tax-free wrapper doesn't have to die with the person. ISAs also became continuing accounts of a deceased investor a few years back. They keep growing tax free for up to three years, or until the estate is wound up. Providers rarely volunteer any of this. You have to ask.
Which means the practical job is a phone call
Tell the provider, ask specifically about the additional permitted subscription, and ask what the account is currently worth including interest since the date of death. Two questions, and they routinely make a four-figure difference.
Both of these accounts share the same weakness: they're opened online, in the saver's own name, funded by a standing order nobody else recognises, and never mentioned again. If nobody knows the account exists, none of the rules above ever get used.
Leave your family a map, not a mystery.
Inherit Vault is a digital inheritance vault: every account, policy, and instruction your family will need, encrypted so only you can read it, released to your executor when it genuinely matters.
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