Chancellor George Osborne disclosed in the 2014 Autumn Statement that partners will be allowed to acquire their spouse’s Isa benefits following death
Previously when somebody passes away, the savings in their Isa give up their tax-free standing and their partner begins paying tax on that money. Since 3 December, when someone dies, their husband or wife will have the ability to inherit their Isa and maintain its tax-free status.
Up until these improvements came into effect, if somebody passes away, they were not able to pass on their Isa to their wife or husband even if they have saved the money jointly. It is suspected that 150,000 consumers a year lose on any tax advantages of their partner’s Isa after death. But now, if an Isa holder dies, they will can pass on their benefits to their spouse or civil partner via a new Isa allowance which they will have the ability to use from 6 April 2015.
This indicates the surviving spouse or civil partner will be permitted to invest as much into their specific Isa as their partner used to have in addition to their usual annual limit. The limit for the tax year 2014/25 is £15,000 but will in the future rise to £15,240 in April. There was, however, no mention of excluding assets in Isas from IHT.
Bob Cook, Principle of Platinum Financial Consulting, welcomes the improvements. He says Isas are “necessary” for the personal economic future of countless UK savers. He added the older generation of Isa buyers tend to take their money from Isa portfolios, the statement is a “major relief” for many as the remaining spouse can continue to enjoy the income tax free.
“This income is even more significant today, as bank deposit rates hover at all time lows and different larger yielding assets remain hard to find,” he added.
Mr Osborne further announced that there will be plans for the 55 per cent ‘death tax’ which at this time applies when you pass an unused pension pot to be cancelled. “Customers will be able to pass on their pension plans to their loved ones tax-free,” he said. Furthermore, individuals who die before the age of 75 with a joint life or guaranteed term annuity will additionally be able to pass it on tax-free.