Back in 2014 the then Chancellor of the Exchequer, George Osborne, announced that that Individual Savings Accounts (ISAs) would become inheritable by surviving spouses and civil partners.
At the time, nobody – not even the Treasury – was clear what the Chancellor meant.
When the plans for ISA ’inheritance’ eventually emerged, they were far from simple.
Although a surviving spouse or civil partner could effectively take over the investments in their deceased partner’s ISA, the process revolved around the ISA’s value at the date of death, not when the actual transfer took place and to make matters worse, the ISA tax rules ceased to apply at death, but then started up again once the survivor’s inherited ISA was in place!
This made an administratively complicated process out of what was meant to be a very simple, straightforward idea.
Thankfully last November, in recognition of considerable lobbying and a protracted development of legislation, regulations were approved to simplify the process considerably.
Now, for deaths occurring after 5 April 2018, in most circumstances:
- The ISA tax advantages of UK income tax and capital gains tax exemptions will continue throughout the period of estate administration.
- The inherited ISA can include any increase in value during that period.
Ryan Marshall, Independent Financial Adviser at Pembroke Financial Services of Shoreham commented “ If you are a couple and needed another ‘excuse’ for contributing to an ISA – either as a tax-year-ending or tax-year-starting payment – the new inheritance rules are a pretty good one!”
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