New ISA regulations: What you need to know

As of 6th April 2018, it has become even more beneficial for couples to invest in an Individual Savings Account (ISA), as new government regulations have further extended ISA tax protections for surviving spouses and civil partners, following on from the April 2015 amendments.

This is great news for couples, but these regulations are complex, and the following serves as a basic breakdown:

Under previous regulations…

ISA savings could be inherited through Wills or the Rules of Intestacy but…

• The survivor’s maximum ISA allowance—their permitted yearly amount to reinvest tax-free—remained unchanged.

As of April 2015…

Surviving spouses or civil partners can inherit ISA savings from their deceased partner without losing tax protection

• Survivors whose spouse or civil partner has died on or after 3rd December 2014 is entitled to an additional ISA allowance, a one-off ‘Additional Permitted Subscription’ (APS), equal to the value of the deceased person’s ISA at the time of death.
• Even if it is NOT the spouse or civil partner who inherits the ISA savings, they are still entitled to the same APS. Therefore, if the deceased had £23,000 in their ISA, the survivor is entitled to £23,000 APS.
• The APS must be claimed via application form during the three years after the deceased’s death, or if longer, 180 days after the administration of the deceased’s estate has been completed.

As of April 2018…

All types of ISA (excluding the Junior ISA) turn into a ‘continuing account of a deceased investor’ upon the deceased’s death.

• If the ISA grows in value after death, that growth remains tax free.
• The APS will be equal to whichever value is higher: the deceased’s ISA value at the time of death, or the value of the money passed on after the probate process is completed.

E.g. If the value is £13,000 at the time of death and £13,500 when passed on, the APS will be £13,500. If the value is £13,000 at the time of death and £12,500 when passed on, the APS will still be £13,000.

This is by no means a comprehensive breakdown of the rules and we strongly advise seeking professional advice before investing.

Here at Astle Paterson, we can advise about the rules in the context of making a Will or dealing with a loved one’s estate.