I Can Invest How Much in My ISA?!

• Time Limit Example
• Time limits
• Example Circumstances
• Additional Permitted Subscription

The inheritable ISA allowance is here – read on for some examples of how this works in practice.

In February’s Life Focus, we extolled the virtues of the Individual Savings Account (ISA) – a largely tax-free investment environment.

Time Limit Example

• Mr Wright died on 20th April 2015.
• His estate is wound up on 20th August 2015
• His Executors transfer ownership of the ABC stocks to Mrs Wright on that day.

If Mrs Wright wishes to make the APS payment “in specie”, she would have from 20th August 2015 until 16th February 2016 (180 days after estate is wound up). If she wishes to make the APS payment in cash, she would have until 19th April 2018 (3 years from date of death).

Don’t let this extra tax-free allowance pass you by – contact our Wealth Planning department to find out how we can help you.  For more information, you can call on 0141 248 3434 or e-mail a member of the team:-

• Grant Johnston
• Graham Murray
• Ron Nicolson
• Rebecca Ellen
• Stephen Blagbrough

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Time limits

The APS can only be used within certain time limits. We appreciate that dealing with these matters immediately after losing a loved one will be particularly difficult for you, and WJM’s Private Client and Wealth Planning departments can keep you right to ensure that, in your grief, you don’t miss out on the APS. 

The time limits are as follows:

• For subscriptions made in cash, the APS allowance will be available for three years after the date of death (or up to 180 days after the deceased’s estate is wound up).
• For subscriptions made “in specie”, the APS allowance will be available for 180 days after ownership of the assets passes from the Executors of the deceased’s estate to the surviving spouse/civil partner.

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Example Circumstances

• Mr Wright dies on 20th April 2015.
• ISA held by Mr Wright at death - ABC ISA (stocks and shares), value £44,760
• Surviving spouse: Mrs Wright.

Following the Chancellor’s announcement, Mr Wright (prior to his death) asked WJM’s Private Client department to review the terms of his Will. Mr Wright’s Will left all of his assets to Mrs Wright; this means that the APS payment could be made in cash or “in specie”. The “in specie” payment is only possible if the ISA is left to the surviving spouse by Will. The benefit of “in specie” payments is that the invested stocks are never out of the market and can therefore benefit from market gains. This works both ways, of course: if the market falls, then the value of the invested stocks may also fall.

What the above means for Mrs Wright:

• Because Mr Wright’s ISA was worth £44,760 when he died, Mrs Wright automatically has an APS allowance of £44,760.
• In addition, Mrs Wright has not yet utilised her own ISA allowance of £15,240 in the current tax year.
• Therefore Mrs Wright can invest a total of £60,000 (the personal ISA allowance of £15,240 and the APS allowance of £44,760) in ISAs this tax year.
• Mrs Wright does not have to invest with ABC; instead, she can choose her own provider, or consult WJM’s Wealth Planning department for financial advice in this area.

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Additional Permitted Subscription

The Chancellor’s 2014 Autumn Statement revealed that ISAs can now effectively be passed on death to the surviving husband/wife/civil partner. In practice, the value of the deceased’s ISA becomes an additional ISA allowance for the surviving spouse. This ‘additional’ ISA allowance is called the Additional Permitted Subscription (APS).  

Making use of the APS, in addition to your usual ISA allowance, could potentially increase your tax-free income, making daily life financially easier following the loss of your loved one. If you don’t need extra income, making use of the APS could help you achieve capital growth free of income and capital gains tax, thus providing a potentially higher inheritance for your family.

Here is a brief example of how the transferable ISA allowance works, centred on elderly fictional couple Mr and Mrs Wright:

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