Additional Permitted Subscription (APS) for ISAs

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.