Passing on a Tax Free Status Post Death
November 29, 2017
Death of a spouse or civil partner before 3 December 2014 meant the loss of the tax free status for ISA holdings. With effect from 6 April 2015 a claim can be made to transfer the value of a spouse or civil partners ISA holding at death irrespective of the value provided the deceased and surviving spouse or civil partner were living together at the date of death.
The change has come about because couples tend to save from joint incomes and on the death of a partner the loss of the tax free status was viewed as unfair, possibly creating unexpected tax charges. New legislation provides for surviving spouses and civil partners to effectively regain the tax free status of the value of their partner’s ISA holdings at death and is identified as the “Additional Permitted Subscription” (APS). This is in addition to the annual subscription limit of £20k for the 2017-18 tax year.
Claims made from 6 April 2015 apply to deaths on or after 3 December 2014 and there are separate time limits for cash and “in specie” transfers. Stocks and shares APS transfers are limited to 180 days from the date of beneficial ownership passing to the surviving spouse or civil partner. Cash APS transfers are generally limited to within 3 years of death or 180 days from completion of the administration of the estate if later. There are transitional rules for deaths between 3 December 2014 and 5 April 2015, but the general cut-off date in these circumstances is 5 April 2018.
It is therefore important to take action before 5 April 2018 where the above may apply and consider the impact of any APS transfers on the survivor’s IHT position as ISA subscriptions in any form are subject to IHT.
If you would like to discuss the above blog in more detail, or you would like to speak with a member of our team, please contact Alison Houghton or call 0115 972 1050 to be put in contact with a menmber of our Special Tax team.