Data1 shows that six out of seven bereaved partners could be paying tax unnecessarily on ISA savings they inherit.
Since April 2015, bereaved spouses or civil partners have been entitled to an extra ISA allowance. This is achieved by what’s called an Additional Permitted Subscription (APS). If the investor died before 6 April 2018, the APS is equal to the value of the ISA on the date of death. If the investor died on or after 6 April 2018, their ISA will become a continuing ISA. In this case, the APS is equal to the higher value of the ISA on the date of the investor’s death, or the value of the ISA on the date it stops being a continuing ISA (completion of estate administration / third anniversary of date of death / all funds withdrawn). The surviving spouse therefore has the option of having the higher APS value.
Using your APS
You can use the allowance in one go or as separate lump sums. However, time limits do apply.
1HMRC data obtained by Zurich, Jan 2019
The information contained in this article does not constitute advice, please contact a financial adviser for advice based on your individual needs and circumstances.