WEEKEND WEB: Rule change means ISA benefits can be passed on
SCOTT WOODS with his weekly financial advice column, MONEY MATTERS...
Did you know that you can inherit your partner’s ISA savings? New rules came into being that mean ISA assets can now be passed on to spouses or civil partners, and although it may not be nice to think about, it could make a huge amount of difference should the time come.
Under the previous system, when someone died, any savings held in an ISA automatically lost their tax-free status. This meant that the surviving partner would have to start paying tax on any returns or income earned from it, which could add up to a significant sum if the ISA holder had been saving for many years.
The system was widely thought to be unfair, particularly given the fact that couples tend to save from joint incomes, they’d have to pay tax on money they thought was protected, and thousands of people were caught by these unexpected tax charges every year.
The rules now mean that if an ISA holder dies, the surviving spouse or civil partner will be able to inherit the ISA and retain its tax benefits. This is in the form of an additional allowance, the surviving partner is given an ‘additional permitted subscription’ (APS), a one-off ISA allowance that’s equal to the value of the ISA at the date of the holder’s death, which won’t be counted against the normal ISA subscription limit but will instead be added on to the survivor’s own ISA limit.
In other words, you’ll be entitled to an additional allowance that would cover the value of your partner’s savings as well as your own. For example, if your partner had £50,000 in ISA savings, your ISA allowance for this tax year would be £70,000, made up of the value of your partner’s savings and your own ISA allowance for the 2017/18 tax year, which is £20,000.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.