We are fast approaching the end of the tax year and indeed the forthcoming Budget. There are various allowances which are available on a yearly basis some of which cannot be carried forward if not used in that tax year; others, like the Inheritance tax Annual Exemption (currently £3000) can be carried forward to a limited extent.
The Individual Savings Accounts (ISA) allowance, which for 2014/15 is £15,000, is an allowance which if not used in a particular tax year is lost. There was some focus on ISAs in the recent Autumn Statement with the announcement that, from 6th April 2015, if an individual dies then his or her spouse or registered civil partner will enjoy an additional ISA allowance equivalent to the value of their deceased partner’s ISAs at the date of his or her death.
This was presented in some parts of the media as the end of the death tax on ISAs. In fact if an individual leaves his or her estate to his or her surviving spouse or civil partner no Inheritance tax is payable on any of the assets left on death, whether or not these include ISAs, so there is no “death tax” to abolish on ISAs in these circumstances. If an estate, including ISAs, is left to a beneficiary other than a surviving partner, Inheritance tax will continue to be payable in the same way as before the Autumn Statement.
At present, however, when someone dies their ISA allowance dies with them leaving the surviving partner with a smaller allowance than beforehand. This will no longer be the case and, subject to the rules of the investment company with which the deceased partner’s ISA is held, the deceased’s investments can continue to be held in a tax-free wrapper by his or her partner.
There is no need to make any changes to your Will to take advantage of this change which no doubt will be welcomed by bereaved partners.