New ISA Inheritance Rules

New ISA Inheritance Rules

The new ISA regulations have been amended in order to provide an additional ISA allowance for the spouse or civil partner of an ISA saver who dies on or after 3rd December 2014. This will be equal to the value of the deceased person’s ISA savings at the time of their death, and will be in addition to the normal ISA subscription limit.

This measure will enable the spouse or civil partner of a deceased ISA saver to benefit from an additional ISA allowance, and therefore to have more of their savings tax advantaged.

Example:

William died on 5th December 2014, leaving £50,000 of ISA savings and investments to his wife Anne. On 6th April 2015 she is given a one-off tax-free allowance of £50,000 to invest into a new or existing ISA, on top of her existing ISA allowance of £15,240. This gives her a combined tax-free ISA allowance of £65,240.

To conclude, any money you inherit this way will be in addition to any ISA allowance you have. This does not apply to common-law partners.

Important Considerations:

-These new rules should prompt individuals to redraft or make a will in order to ensure their ISAs are left to each other, or they are at risk of missing out on this new tax break.

-The value of ISAs are subject to inheritance tax on death with one main exception – where ISA investments qualify for business property relief such as qualifying AIM shares held for a two year period. Please note transfers of ISAs between spouses on death are free from IHT.

Contacting an Independent Financial Adviser can help you understand what these new rules mean to you and how they can benefit you.

This article is intended for information purposes only and should not be taken as advice.