“To have and to hold...”

After the pomp and ceremony of the Royal Wedding, Simon Wong, reflects on how a flaw in the Individual Savings Accounts (ISA) rules that prevented surviving partners from inheriting the full amount of their deceased partner’s ISA tax-free was closed by the government on 6th April 2018.

by Simon Wong

Senior Wealth Planner

Since April 2015, ISA investors have been able to pass on the value of their tax-free ISA to a spouse or civil partner on death through an ‘additional permitted subscription’ (APS). However, an anomaly in the original legislation meant that any investment growth of the ISA between death and the additional ISA subscription by the surviving partner was not taken into account.

Additional permitted subscriptions are available in respect of deaths on or after 3 December 2014. The deceased and the surviving spouse must have been living together at the date of death so not separated under a court order, under a deed of separation, or in circumstances where the marriage or civil partnership has broken down.

On the death of an ISA investor on or after 6 April 2018, the ISA becomes a ‘continuing account of a deceased investor’ and can continue to benefit from the ISA tax advantages.

In general, additional permitted subscriptions:

  • can be made with the manager who held the deceased’s ISA or another manager who agrees to accept the subscriptions
  • are limited to the value of the deceased’s ISA at their date of death if the investor died on or before 5 April 2018
  • can be either the value of the deceased’s ISA at their date of death or the point the ISA ceased to be a continuing account of a deceased investor if the investor died on or after 6 April 2018
  • can be made to a cash, stocks and shares, or an innovative finance ISA
  • can be made into a Lifetime ISA if the investor is resident in the UK and will count towards the Lifetime ISA payment limit but not the annual overall ISA subscription limit
  • can be made if a surviving spouse is 16 or 17, but only into an ‘adult’ cash ISA
  • can be made in cash or inherited non-cash ISA assets
  • are available whether or not the surviving spouse inherited the deceased’s ISA assets
  • can be made by non-residents
  • cannot be made to (or from) a Junior ISA
  • count as previous year subscriptions for all other ISA purposes

It is important to note that once an additional permitted subscription has been made with an ISA manager, any further additional permitted subscriptions up to the limit must be made with the same manager.

To arrange to meet one of our Chartered Financial Planners to discuss tax and estate planning, please contact your investment manager who will be happy to arrange a meeting.

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