No, an Individual Savings Account (ISA) itself cannot be directly gifted or transferred to another person during your lifetime. ISAs are personal tax wrappers designed for individual saving and are not transferable.
Why Direct Gifting of an ISA is Not Possible
ISAs are fundamentally personal savings vehicles. Each individual is allocated their own annual ISA allowance, which they can use to save or invest tax-efficiently. The tax benefits, such as income tax-free interest and capital gains tax-free growth, are tied to the individual account holder. Allowing direct transfer or gifting of an existing ISA would complicate the tracking of individual allowances and could potentially be misused.
How ISA Savings Can Be Passed On After Death
While an ISA cannot be gifted while you are alive, the value of the savings within an ISA can be passed on to a surviving spouse or civil partner upon your death. This is handled through a special provision called an Additional Permitted Subscription (APS).
- Additional Permitted Subscription (APS): If you die, your spouse or civil partner can utilise an increased one-off allowance. This allows them to subscribe funds into their own ISA up to the value of your ISA at the time of your death, or when the administration of your estate is complete, without it counting towards their own annual ISA allowance. This mechanism helps ensure that the tax-efficient nature of the savings can largely be preserved for the surviving partner.
Gifting Money for Someone Else's ISA
Although you cannot transfer an existing ISA, you can certainly gift money to another individual, who can then choose to subscribe those funds into their own ISA, provided they meet the eligibility criteria and have available ISA allowance for the current tax year. This is a common and legitimate way to help friends or family members save tax-efficiently.
Here's a breakdown of the two scenarios:
| Feature | Gifting an Existing ISA (Not Possible) | Gifting Money for an ISA (Possible) |
|---|---|---|
| Recipient | Not possible to transfer to anyone else during your lifetime, except via APS to spouse/civil partner after death. | Any eligible individual (e.g., child, grandchild, friend) who can open and subscribe to their own ISA. |
| Account Type | Attempting to transfer an existing personal ISA. | The recipient opens and funds their own new or existing ISA. |
| Allowance Impact | No impact on recipient's ISA allowance during lifetime. | The gifted money counts towards the recipient's own annual ISA allowance for the tax year in which they make the subscription. |
| Benefit | Not applicable during lifetime. After death, spouse/civil partner benefits from APS to retain tax wrapper. | Helps the recipient build their own tax-efficient savings. |
| Example | Trying to sign over your own Stocks and Shares ISA to your child. | Gifting £5,000 to your child, who then deposits it into their own Cash ISA or Stocks and Shares ISA. |
Key Considerations for Gifting and ISA Planning
- Eligibility: To open an ISA, an individual must be a UK resident for tax purposes, 18 or over for most ISA types (or 16-17 for a Cash ISA), and not have subscribed more than their annual allowance in the current tax year.
- Annual ISA Allowance: Each eligible individual has their own annual ISA allowance, which is the maximum amount they can subscribe into ISAs in a given tax year. For the current tax year, this allowance is £20,000.
- Junior ISAs (JISAs): For children under 18, a Junior ISA (JISA) is available. Parents or guardians can open a JISA for a child, and anyone can contribute to it, up to the specific annual JISA allowance. The money belongs to the child and they can access it when they turn 18.
- Inheritance Tax: While gifting money can be a way to pass on wealth, it's important to be aware of any potential inheritance tax implications for gifts made during your lifetime. Large gifts may be subject to rules around the "seven-year rule" for Potentially Exempt Transfers (PETs). Consulting a financial advisor for estate planning is recommended for significant gifts.
