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Bereaved savers may be paying tax unnecessarily on inherited ISA’s

29th January 2019

In the Chancellor of the Exchequer’s 2014 Autumn Statement George Osborne announced that under new rules surviving spouses may inherit their deceased partner’s Individual Savings Account (ISA), referred to as an Additional Permitted Subscription (APS), and that it may stay as an ISA, meaning that they would not pay tax on any capital gains.

However, recent figures from HMRC reveal that a low number of bereaved savers are using the APS, some four years after this took effect.

Around 150,000 married ISA savers die each year, according to estimates from the Tax Incentivised Savings Association. However in 2017-2018 only 21,000 eligible spouses used their APS entitlement, about one in seven.

In their simplest form, under APS rules the spouse or civil partner of a saver or investor who has passed away on or after 3 December 2014 is able to benefit from the value of their ISA.

Instead of inheriting the ISA itself, the partner receives an extra allowance equal to the value of the deceased partner’s ISA account at date of death.

For example if a deceased spouse had £80,000 in ISA savings, the surviving spouse would be able to invest £80,000 tax-free above their own £20,000 for a total allowance of £100,000.

Thereafter a spouse can choose to keep the money with the original ISA provider, put the money with their own ISA provider or open a new cash or stocks and shares ISA. Those who do not claim within three years from the date of death lose the entitlement.

George Ide has a strong and well established private client department and a wealth management department that is regulated by the Financial Conduct Authority. We are therefore ideally placed to assist clients in this dual capacity, with all matters relating to the APS, and provide any ongoing investment advice thereafter.

Our wealth management department was established in 1999 from the firm’s wish to provide clients with comprehensive investment advice that is professional and not influenced by third-party sale or commission considerations.

Contact the George Ide team on 01243 786668 or email us at info@georgeide.co.uk for more information about APS entitlements.

Sam Atkinson Chartered MCSI. Investment Advisor

“Again thank you for looking after my investments so well – and taking my worries away as to how to make the most of the money – which I have been so lucky to inherit” Mrs L

 

General, George Ide, Investment, News
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