Accounts & Bookkeeping

Inheriting ISA’s

New rules surrounding the inheriting of ISA’s have come into play and it is important for family to understand how they work.
If the holder of an ISA passes away it is now possible for their spouse or civil partner to invest a sum of money that is equivalent to the amount that the deceased had built up in their own ISA. This can be done alongside their usual ISA limit for the tax year and it is claimable from 6th April 2015.
ISA Rules
The surviving spouse will then be able to benefit from investment returns that are free from tax on savings that are equal to the total ISA fund of the deceased, however, there is no requirement for it to be the same assets that were received from the ISA of the deceased which are paid into the new or existing ISA of the spouse. This means that the spouse can benefit from the increased allowance from all assets.
It is not the asset that is inherited but is is the allowance and this means that the spouse can benefit by putting their own assets into the ISA of the deceased and then claiming the increased allowance. As set out in the will of the deceased, it is still possible for the assets to be distributed.
What This Means For You
The tax benefits of an ISA are well known and when funds are held within an ISA wrapper they continue to benefit from no income tax or capital gains. The new benefit for the spouse is the continuity of tax free growth and it makes it possible to continue saving in an environment that is tax free. However, the new rules do not offer any tax benefits when it comes to inheritance it is just a simple case of an increase in ISA allowance for a set period following the death.

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