New data reveals that thousands of widows are missing out on valuable tax breaks on money inherited from their late husbands or wives.
In 2015, the government introduced a new rule that allows spouses to claim an extra ISA allowance. This allowance, known as an Additional Permitted Subscription allowance (APS allowance), is available to the surviving spouse or civil partner of a deceased ISA investor, where the investor died on or after 3 December 2014.
According to the Tax Incentivised Savings Association (an ISA trade body), around 150,000 married ISA savers die each year. However, just 21,000 eligible spouses used their APS allowance in the 2017-18 tax year, meaning they may be paying more tax than they need to pay.
Many bereaved spouses are unaware of the extra protections they can claim on, while others find the process difficult and confusing.
It is thought that many of those who lose out are widows whose husbands pass away without informing them of the exact nature of their financial affairs. In some cases, widows only discover large sums of money long after their husband’s death.
Situations like this have led too many to call for greater transparency between spouses around their financial affairs. A culture of privacy around financial matters is rife among the ‘baby boomer’ generation, where the higher earner often manages the money and investments. This can leave the bereaved in a precarious position, especially if they don’t know what bank accounts, investments and companies their spouse may have managed.
If your partner has left funds held in an ISA to someone else, you’re still entitled to APS. For instance, if your partner left an ISA of £45,000 to their friends and family, you can use your APS allowance to put an extra £45,000 into an ISA of your own.
Think you might be able to claim? You can apply through your late partner’s ISA provider. You will need to fill in a form, similar to when you open an ISA.
If you have any questions around this topic, please feel free to get in touch with us directly.
TAX PLANNING, ESTATE PLANNING AND WILLS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY (FCA)
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.