As a spouse (reference to spouse includes civil partner) a question you may find us asking during the administration of an estate is “Do you wish to utilise the annual permitted subscription?”.
Unfortunately, the majority of people are not aware of this subscription or what it means for them.
Rules that were introduced in April 2015 allow for you to inherit your spouse’s ISA saving allowance on deaths that occurred on or after 3 December 2014.
Prior to April 2015, when an account holder died any ISA account held automatically lost its tax free wrapper, passed into an estate and was distributed in accordance with the terms of the will.
As a spouse you would only benefit from the ISA allowance available to you, as an individual, for that tax year. The current allowance is £15,240.00 and will rise to £20,000.00 for the 2017/2018 tax year.
The new rules now mean that as a spouse you can inherit and retain the benefits of an ISA saving allowance. The allowance is treated separately to the estate and means you can inherit the ISA allowance from non-cash assets and cash assets.
Non-cash assets are:
- Stocks and shares in qualifying ISA investments (i.e. portfolios);
- National Loans Act Securities;
- Depositary Interests;
- Short-term Money Market funds; and
- Money Market Funds.
To be eligible for the allowance there is a requirement that you must have been living together at the date of death. The annual permitted subscription is also limited to the value of the ISA account at the time of death, for example:
Richard has £65,000.00 in ISA savings. Dorothy, his surviving spouse, will inherit the ISA allowance of £65,000.00 in addition to her own individual savings allowance of £15,240.00. Dorothy will have the benefit of a total allowance of £80,240.00.
The annual permitted subscription is available with either the manager who held the deceased’s ISA account or a new manager. Please note that if you wish to open a new account not all institutions will accept the request. Once you have completed the annual permitted subscription paperwork and this has been accepted, any further subscriptions must be made with the same manager.
As with all new rules there are time limits and forms in which the annual permitted subscription can be used. These time limits are as follows:
- Non-cash assets – 180 days from transfer; and
- Cash assets – 3 years after the date of death, of if late, 180 days after the administration of the estate is complete.
If you find yourself being asked ‘Do you wish to utilise the annual permitted subscription?’ we would always recommend that you seek financial advice. The advice should be in relation to your available options and to provide assistance in completing the application required to open any new account.
For additional guidance please see the information provided by HM Revenue and Customs.
Our Independent Financial Advisers would be happy to discuss your investments and lifetime planning with you.