Are you paying unnecessary tax?

Spouses Unnecessarily Paying Tax on Inherited ISAs – Tax Advice from Clifford Osborne

Data² shows that six out of seven bereaved partners could be paying tax unnecessarily on ISA savings they inherit.

Since April 2015, bereaved spouses or civil partners have been entitled to an extra ISA allowance. This is achieved by what’s called an Additional Permitted Subscription (APS). If the investor died before 6 April 2018, the APS is equal to the value of the ISA on the date of death.

If the investor died on or after 6 April 2018, their ISA will become a continuing ISA. In this case, the APS is equal to the higher value of the ISA on the date of the investor’s death, or the value of the ISA on the date it stops being a continuing ISA (completion of estate administration / third anniversary of date of death / all funds withdrawn).
The surviving spouse therefore has the option of having the higher APS value.

Using your APS

You can use the allowance in one go or as separate lump sums. However, time limits do apply.

²HMRC data obtained by Zurich, Jan 2019.

Clifford Osborne are Independent Financial Advisors (IFA) based in Eastbourne, East Sussex, offering investment advice and review, tax advice, early retirement advice, pension advice, mortgage advice and more. Our clients often come from Uckfield, Lewes, Brighton, Tunbridge Wells, Hastings, Bexhill, Newhaven, Seaford, Crowborough and further afield. Please read our blog or get in touch for investment tips and advice.

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It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our current understanding of taxation and can be subject to change in future.

It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

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