Being able to inherit an additional one-off ISA allowance based on the value of your spouse or civil partner’s ISAs has been possible since 6th April 2015. This is known as the Additional Permitted Subscription (APS). The APS is available whether or not you are inheriting the funds held within the ISAs – although, in that case, other funds would need to be available to make use of it.
The rules around inheriting the allowance are time bound and vary depending on the spouse’s (civil partner’s) date of death and whether the funds are being deployed in specie or as cash. However, if we look at the rules for those who have died on or after 6th April 2018 and making any payment in cash (subsequently invested), these can be captured as follows:
The APS must be made within 3 years of the date of death or 180 days of the completion of the administration of the deceased’s Estate, whichever is the later.
Whilst many of our client’s finances are closely interlinked making it very straightforward to identify and utilise the APS there will of course be exceptions. For couples who keep their finances separate, complicated estates or for individuals simply not wishing to deal with rearranging financial matters soon after the loss of a loved one, it can be easy to overlook this allowance.
Taking time to check if the APS might be available will give you access to the potential for tax free growth within the ISA wrapper, regular or ad-hoc payments without concerns around income or capital gains tax. Do remember that ISAs come in various guises; cash, stocks and shares, innovative finance and lifetime ISAs. So, a forensic search of bank, building society and other financial institutions (insurance companies and provider platforms) may be required. Equally, for those concerned about inheritance tax, ISAs will ultimately fall into your Estate. ISA investments taking advantage of Business Relief may be considered, although considerably raising the investment risk.
If you need advice and assistance reorganising your finances following the death of a loved one, please do contact Wingate Financial Planning. We are a multi award winning, friendly, local, Chartered Financial Planning firm.