12th March 2015
A spouse inheriting their partner’s ISA investments will be free to change ISA provider under new regulations just issued by the Treasury and HMRC.
They can also for example transfer from a stocks and shares ISA to a cash one. Previously there had been suggestions that they might have to maintain the provider and plans of their spouse, though they can continue to do so if they wish.
Danny Cox, chartered financial planner, Hargreaves Lansdown: says: “This provides a much more flexible solution and a sensible approach. The spouse will now have the option to change to a different type of ISA, cash or stocks and shares and change providers if they wish. The principle here is that family money held in separate ISAs can now retain their tax efficiency on death. The process is a little clunky but as a short term fix makes a lot of sense. Phase 2 will provide a smoother process where the ISA status is effectively retained on death.”
Under the new system, the surviving spouse will be given an additional, one off ISA allowance, known as the additional permitted subscription equal to the value of the deceased’s ISA holdings. This will be known as the additional permitted subscription. This enables them to re-shelter assets which were in a spouse’s ISA into an ISA in their name.
Hargreaves Lansdown has also given the following worked example
Example of how it will work:
1. Investor holds £50,000 of ISA savings and investments and dies on the 3rd December 2014.
2. The surviving spouse gets an additional permitted subscription allowance (APS) of £50,000
3. Following probate, the value passes to the surviving spouse.
4. On 6th April 2015, the spouse has the opportunity to use the APS to shelter £50,000 into an ISA in their name in addition to the £15,240 ISA allowance, giving a combined allowance of £65,240.
5. The spouse has three years to use the APS if funding by cash or 180 days if using an inspecie transfer
6. This could be subscribed to a new ISA or an existing ISA of their choice