In the 2014 Autumn Statement, Chancellor George Osborne announced that ISA assets could be passed on to surviving spouses of a deceased ISA saver so that they could benefit from an additional ISA allowance.
The new rules give the surviving spouse an ‘additional permitted subscription’, a one-off ISA allowance, equal to the value of the deceased’s ISA savings at the date of death, without this amount counting against the normal ISA subscription limit. Usually couples save from joint incomes, so the main advantage is that it offers bereaved individuals the chance to secure their financial future and enjoy the tax advantages they had previously shared.
The guidelines outline key information on the APS and what it means for surviving spouses and civil partners.
The APS allowance can be used from 6 April 2015. In most cases, for subscriptions made in cash, the allowance is available for three years after the date of death.
The APS allowance can be used with the deceased’s ISA provider or another ISA provider. Not all ISA providers will accept APS allowance subscriptions, but they are obliged to pass relevant APS allowance information on to another ISA provider. Some ISA providers will allow payments to be made in instalments whereas others only allow a lump sum.
Carol Knight, Operations Director at TISA said:
“Approximately 150,000 married ISA holders die each year and so these changes will benefit spouses or civil partners of ISA holders who die on or after 3 December 2014 by increasing the amount that they can save by offering the tax advantages in an ISA wrapper.
“We see it as a much fairer outcome and is one we have long advocated. Often a wife or civil partner will have savings in a husband’s name and can lose out significantly under the previous rules whereby investments held by deceased ISA savers lost their tax-free status before they were inherited. Allowing ISA savings to be transferable without leaving the ISA wrapper will enhance the greater flexibility and will act as a further incentive to save within ISAs.”
