Did you know that hundreds or thousands of bereaved partners in the UK could be paying unnecessary tax on cash ISA savings that are inherited from loved ones?
Since 2015, married couples and civil partners have been entitled to an extra ISA allowance when their partner dies, which is known as an additional permitted subscription (APS). The allowance for them is the value of the partner’s ISA account at the time they passed away.
However, a freedom of information request has revealed that just 21,000 people used the allowance to inherit a partner’s ISA balance in 2017/18 tax year.
Under the APS rules, if the deceased partner had £25,000 in savings when they passed away, for example, then the living partner would be able to invest £25,000 tax-free on top of their own £20,000 annual allowance, taking their total allowance for the year to £45,000
It’s interesting how even 4 years after this allowance came into play, the take-up is so low. The people who miss out on the allowance will then be hit by a tax bill later which will eat into their returns on their savings.
An APS can be made in several ways:
Cash – investors can make a cash contribution using cash inherited from the deceased
Investments – these held in the deceased ISA can also be transferred into the surviving spouse or civil partner’s ISA directly without needing to be sold, within the same company with which the deceased held their ISA.
Contact us today to discuss this further and speak about your inheritance tax options.