It was announced in last year's Autumn Statement and the March Budget that on death the benefit of an individual's ISA allowance can be passed on to a surviving spouse or civil partner.
Regulations have now been passed to bring these rules into force and they are available on the death of any ISA investor on or after 3 December 2014. However, it does appear that what sounds like a simple idea will be far from straightforward in practice. Under the old rules the beneficial tax status of any ISA account and/or investments ceased immediately on death. This will continue to be the case, even where there is a surviving spouse or civil partner who inherits the asset and satisfies the requirements of the regulations.
The amount of the transferable allowance will be fixed at the value as at the date of death and the ISA status will be temporarily lost until the account has been transferred into the name of the spouse – which will not be possible until after the Grant of Probate has been issued. Any interest or capital appreciation which has arisen in the meantime will be treated separately and will not form part of the transferred allowance. However, if the value of any investments transferred has fallen it will be possible for the allowance to be "topped-up" with cash and/or investments. Executors will also need to account for basic rate income tax on any interest which has arisen during the administration period.
This is a welcome amendment to the ISA regulations, but there may need to be some careful fine-tuning when arranging for the allowance to be transferred and advice should be taken accordingly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
