Is it possible that you could be paying tax unnecessarily on an inherited ISA? There is a tax break intended to help bereaved partners, whether this is a spouse or a civil partner. The tax break was introduced in 2015, allowing for an additional permitted subscription for those who inherit an ISA. The value of this subscription depends on when the death occurred.
For those who suffered a bereavement before 5th April 2018, the value of this subscription is equal to the deceased’s ISA at death. For those who have been bereaved after this date, the ISA becomes a continuing ISA and different rules are applicable. It is worth seeking advice to further understand what money you could be saving.
Product provider Zurich submitted a freedom of information request to HMRC. It revealed that only 21000 people took advantage of the rule in the year between April 2017 and 2018. This is only about 14% of those entitled.
The average inherited ISA stands at £55000. This means some savers could be paying close to £110 a year in tax that they should not be paying.
Even though this tax break has been in existence for four years, the uptake is low. 150,000 married ISA holders die each year; therefore, the amounts are not inconsiderable. People are missing out on an amount of money that could ultimately slow the growth of their savings.
The content in this article was correct on 16th February 2019. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on the taxation after bereavement. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.
