Individual Savings Accounts (ISAs)
Money experts have estimated that because the small print about ISAs isn’t widely known, almost nine in ten savers could be missing out when a spouse or civil partner dies.
On the death of an ISA-holding spouse or civil partner, it’s possible to claim an extra ISA allowance. This means that the survivor is eligible for a one-off additional ISA allowance, equivalent to the value of the deceased saver’s ISA: an ‘additional permitted subscription’ (APS) allowance. This is on top of the survivor’s own ISA entitlement, which is £20,000 for the tax years 2017/18 and 2018/19.
The survivor is entitled to the APS allowance even if they do not actually inherit the ISA, and can use the allowance with the deceased’s ISA provider or a provider of their choice. There are time limits for using the APS.
HMRC estimates that the survivors of at least 150,000 ISA holders each year could be eligible to take advantage of the APS. To qualify, the survivor must have been living with their spouse or civil partner at the date of death - in other words, not separated under a court order, under a deed of separation, or in circumstances where the marriage or civil partnership has broken down. Application for APS should be made to the manager of the deceased’s ISA.
The Marriage Allowance allows an individual to transfer 10% of their personal allowance to a spouse or civil partner where the recipient is neither a higher rate nor additional rate taxpayer.
The main scenario in which a transfer is allowed and worthwhile is where one of the individuals has little income and therefore has not used their personal allowance and the other individual does not pay tax at the higher or additional rate. But a transfer was not previously allowed where one of the parties had died.
The Autumn Budget 2017 announced that from 29 November 2017, claims in respect of Marriage Allowance may be made in respect of a deceased spouse or civil partner, and that such claims may be backdated for up to four years.
Transfers could bring tax savings of up to £230 per year.
We appreciate that you might prefer to delegate dealing with your tax matters at this time, and should be pleased to be of service.