Where a person holding an ISA dies leaving a surviving spouse or civil partner, that surviving spouse or civil partner is entitled to an additional tax-free amount up to the value held in the deceased’s ISAs at the date of their death, as well as their own annual subscription. This additional allowance is known as the Additional Permitted Subscription (APS). It has been available since 6th April 2015 where the first death was on or after 3rd December 2014.
The deceased and their spouse or civil partner must have been living together at the date of the death. They cannot have been legally separated.
In the initial draft regulations the survivor was limited and could only make their additional permitted subscription with the ISA manager who held the deceased’s ISA, unless permission was obtained from HMRC. The later published Individual Savings Account (Amendment No. 2) Regulations 2015 were more flexible. The survivor may now make additional subscriptions to an ISA manager other than the deceased’s ISA manager without first obtaining HMRCs permission. This only applies where the additional subscription is made in cash; permission is still required to make a subscription of non-cash assets to a different manager.
The additional subscription is available whether or not the survivor actually inherited the ISA. An additional subscription made in cash can be made either with cash assets inherited from the deceased or the survivors own available cash. If the deceased held a stocks and shares ISA then the surviving spouse must have inherited the non-cash assets in order to subscribe them in specie. If they did not inherit the non-cash assets then they cannot be subscribed in specie, however the survivor may subscribe cash up to the same value.
There are specified time limits in which the additional subscription must be made. These time limits differ depending on whether it is a cash subscription or an in specie transfer.
A cash subscription must be made within 3 years of the death or within 180 days of the completion of the administration of the deceased’s estate, whichever is the later.
A non-cash subscription must be made with 180 days of the beneficial interest in the stocks and shares passing to the surviving spouse or civil partner.
Some additional points:
- Where the deceased held multiple ISAs with different managers the survivor will have different additional subscription limits with each manager.
- Where the deceased held multiple ISAs with the same manager the survivor’s APS will be the combined value of all of the deceased ISAs at death.
- The deceased’s ISA wrapper must still be removed. It is still not directly transferring the ISA to the spouse.
- If a surviving spouse subscribes non-cash assets in specie the maximum amount they can subscribe is the value of the non-cash assets at the date of the death. If the assets have risen in value since the death then they cannot subscribe all of the assets. If the value has fallen then they may make up the difference in cash.