Draft Regulations Allow ISA Tax Status To Survive Death

March 01, 2017

Private Client

Draft Regulations Allow ISA Tax Status To Survive Death

HMRC has published draft regulations that would allow the tax advantage status of ISAs to be retained after the death of the account holders.

Current rules state that when the account holder dies, the tax advantage status of the account is lost, and the funds are usually moved to an account that is subject to income tax.

The aim of the Regulation is to prevent personal representatives and beneficiaries from being liable to income tax during the administration of the account holder’s estate.

Changes will also be made to the Additional Permitted Subscription (APS) for ISAs for surviving spouses that was introduced in April 2015. That rule allows surviving spouses to invest an extra amount into their own ISAs equivalent to what their spouse used to have – in addition to their own annual allowance . There can be multiple Additional Allowances if the deceased had ISAs with multiple providers.

Funds will be allowed to be stay in an ISA account until the administration of the estate is complete, or for 3 years after death, if shorter. This account will be known as a ‘continuing deceased’s account’.

These new Regulations will amend the APS rules to allow the value of the additional allowance to be set at the higher of the value of the investments at death or when the account ceased to be a ‘continuing deceased’s account’.

If you are facing any difficulties dealing with banks in the administration of an estate, do get in touch with Anna Casey-Woodward on 01865 255632 for a no-obligation conversation.

posted by Anna Casey-Woodward | March 01 2017