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3rd July 2024

If your deceased spouse or civil partner held investments in an ISA wrapper at the time of their death, you can inherit a one-off additional ISA allowance without affecting your usual annual ISA allowance.

Individual Savings Accounts (ISAs) are excellent vehicles for retirement saving as they allow you to invest your savings free of income tax and capital gains tax. Every tax year each adult in the UK gets a £20,000 tax-free ISA allowance.

Prior to December 2014, the tax-free status of your ISA investments died upon your own death. This meant the investments were subject to tax on income and gains during the period of administration, and any amounts exceeding your widow’s outstanding ISA allowance at the time of inheritance had to be held in their General Investment Account, also subject to income tax and capital gains tax.

That changed on 3 December 2014 when the government introduced the Additional Permitted Subscription.

What is Additional Permitted Subscription?

The Additional Permitted Subscription is available to you if your spouse or civil partner passed away on or after 3 December 2014 and died with investments held in one or multiple ISAs. It effectively allows you to inherit an additional ISA allowance to the value of your partner’s ISA investments at the time of their death or estate completion date (see below for determining which one applies to you).

It’s important to remember the Additional Permitted Subscription allowance and your spouse’s ISA assets are treated separately. The Additional Permitted Subscription is available even if you don’t inherit your spouse’s ISA assets, and if you do inherit them it’s up to you as to whether you fund your Additional Permitted Subscription allowance through those inherited investments or from cash you already hold.

The Additional Permitted Subscription is flexible, permitting subscription to cash or stocks and shares ISAs the surviving spouse holds, or to new cash or stocks and shares ISAs opened for the purpose. If the deceased partner had multiple ISAs with different providers, the surviving partner receives an Additional Permitted Subscription allowance for each one. The rules apply irrespective of the size of the deceased's ISA pots.

Change in ISA rules

The rules around when the value of the deceased ISA accounts is calculated changed in 2018. This means if your partner died before 6 April 2018, your Additional Permitted Subscription allowance is the value of their ISA at the date of their death. If they died on or after 6 April 2018, it is the value at their estate completion date.

If you weren’t given this information as part of the probate process you can request it directly from your partner’s ISA provider(s).

In-Specie Transfers

If you inherit your spouse’s ISA investments and wish to use them to fund your Additional Permitted Subscription allowance, you don’t have to sell and re-buy them within your ISA. Instead, you can transfer them “in-specie” to your ISA. To do this, it must be within 180 days of the investments passing to you and with the same ISA provider(s) your spouse held the investments with, using your whole Additional Permitted Subscription allowance with that provider. However, once you’ve done so you are free to transfer your ISA balance to another provider.

Cash Subscriptions

When your spouse or civil partner dies, no further money can be paid (subscribed) into their ISA accounts, but they will continue to benefit from the tax advantages of an ISA until either the administration of the estate is complete, the ISA is closed or three years and 1 day have passed – whichever comes first.

Get in touch with an Ascot Lloyd Adviser who can help you understand how you can benefit from the Additional Permitted Subscription for ISAs. Book a call with one of our experts.

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Our Financial Advisers are available on the phone so please contact us if you have any questions.

Important Information

Past performance is not a guide to future performance and may not be repeated. Investment involves risk.

The value of investments and the income from them may go down as well as up and investors may not get back any of the amount originally invested. Because of this, an investor is not certain to make a profit on an investment and may lose money. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is for information purposes only and is based on our understanding of current UK tax legislation and HM Revenue and Customs (“HMRC”).  Levels and bases of taxation and reliefs are subject to change and their value to you will depend on your personal circumstances. Nothing in this communication constitutes financial, professional or investment advice or a personal recommendation. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Nothing in this communication constitutes financial, professional or investment advice or a personal recommendation. This communication should not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments in any jurisdiction. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the document.

Any opinions expressed in this document are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or companies within the same group as Ascot Lloyd as a result of using different assumptions and criteria.

This communication is issued by Capital Professional Limited, trading as Ascot Lloyd.  Ground Floor Reading Bridge House, George Street, Reading, England, RG1 8LS.  Capital Professional Limited is registered in England and Wales (number 07584487) and is authorised and regulated by the Financial Conduct Authority (FRN: 578614).