ISAs transfer of benefits upon death

New rules were introduced in April 2015 that allow for the spouse or civil partner of a deceased ISA saver to benefit from additional ISA benefits. Under the rules, if an ISA saver in a marriage or civil partnership dies, their spouse or civil partner inherits their ISA tax advantages.

Surviving spouses are able to save an additional amount in an ISA or ISAs up to the value of their spouse or civil partner’s ISA savings at the date of death. This additional allowance does not count against the surviving spouse’s/civil partner’s annual ISA subscription limit.

These measures were put in place to help ensure bereaved individuals secure their financial future and enjoy the tax advantages they previously shared, following the death of their spouse or civil partner. There are estimated to be around 150,000 married ISA holders that die each year (equivalent figures are not available for civil partners).

Planning note

ISAs allow equal limits for cash and stocks and shares. This provides savers with the ability to transfer funds from stocks and shares ISAs to cash ISAs allowing far greater flexibility to savers than was historically the case. The maximum amount that can be invested in an ISA is currently £20,000, the limit will remain the same in 2018-19. The income from ISAs is exempt from Income Tax and CGT.

Posted in HMRC notices

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