ISA anomaly to close
Widows will no longer miss out on lucrative interest and investment returns because of a quirk in the ISA system.
From the start of the new tax year, 6 April 2018, an anomaly will be removed meaning ISAs held by deceased savers will continue to be shielded from tax after their death.
Currently, when someone dies the interest and investment returns on their ISA lose their tax-free status until they are moved inside a new ISA. The “new continuing ISAs” protect returns from tax until the administration of the deceased’s estate has completed, up to a maximum of three years.
Since April 2015 a surviving married partner or civil partner has been able to make use of an “additional permitted subscription” allowance in addition to their usual ISA limit. That means someone inheriting £125,000, for example, would be able to save £145,000 in that tax year, rather than the normal £20,000 ISA allowance.
The ISA can be transferred into the surviving partner’s ISA immediately. You do not need to wait until the estate administration is complete.