'I'm a financial adviser - rule means ISAs aren't always tax-free'

'I'm a financial adviser - rule means ISAs aren't always tax-free'It's a detail that many people perhaps don't appreciateCommentsMoneySteven Smith Content Editor08:09, 16 Apr 2026View 3 ImagesJoe Farmer(Image: Joe Farmer/Newspage)Millions of savers could be sitting on a costly misunderstanding about ISAs, an expert has warned. Many believe they are completely tax-free when in reality they could face a significant bill further down the line.‌ISAs have long been marketed as one of the simplest and most effective ways to save, allowing people to build wealth without paying tax. But one expert warns that this “tax-free” label is often taken too far – particularly when it comes to what happens after death.‌The issue is inheritance tax. Currently charged at 40% on estates above £325,000, the threshold has been frozen for years, quietly dragging more and more families into the tax net. Crucially, ISA savings are included as part of the estate. That means a lifetime of careful saving, often built up with discipline over decades, could still be exposed to a significant tax bill.‌Joe Farmer, an Independent Financial Adviser and co-founder at The Retirement Studio, said many have no idea they have to pay inheritance tax on their ISA savings.He added: “I speak to clients every day who believe ISAs are completely tax-free, full stop. They’re genuinely shocked when I explain that on death, ISAs form part of the estate and can be subject to inheritance tax.”He said the scale of the issue was often underestimated, even among those who considered themselves financially savvy.‌View 3 ImagesISAs are tax-free while you're alive, but not after(Image: designer491 via Getty Images)Mr Farmer continued: “I saw a client just last week with an ISA worth over £300,000. That alone nearly takes them to the inheritance tax threshold, before you even consider their home or any other assets.”For many, the problem is not the act of saving – it’s what hasn’t been co...