An ISA ceases on the death of the investor. Any interest or gains in respect of investments in his or her ISA that arise (which in general terms means ‘paid’) after the date of death to the date of closure are not exempt from tax.
But there is no loss of exemption on interest, dividends or gains which arise before the date of death, including any gain treated as arising as a result of the death of the investor under the rules for investments in policies of life insurance.
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