ISAs – inherited on death

Simplifying ISAs Inherited on Death

ISAs inherited on death have become more straightforward following changes for deaths after 5 April 2018. These updates allow ISAs to retain their tax-free status from the date of the account holder’s death. This means they can provide significant benefits for surviving spouses or civil partners. This simplification ensures no income tax or capital gains tax liability until specific conditions are met, offering clarity and financial relief during estate administration.

 

Key Changes to ISA Rules Upon Death

 

For deaths after 5 April 2018 there is a welcome simplification.  From the date of the account holder’s death they will retain their tax free status.  So there will be no income tax or capital gains tax until the earlier of:

  • Three years from the account holder’s death
  • The administration of the estate being complete
  • Closure of the account

This will also mean that where this is passed to the surviving spouse or civil partner, the additional permitted subscription (additional contribution to an ISA in that tax year)  will be the higher of the value at date of death or value when the account ceases to be a continuing deceased’s account.

This is great news.  Hopefully this might also mean that the holdings can be transferred in specie but we will have to wait and see.  Currently they have to be liquidated.

 

How We Can Help

 

At Lewis Brownlee, we specialise in guiding individuals and families through complex financial matters, including managing ISAs inherited on death. Our expert team can help you understand the implications of these changes, ensure you maximise the benefits of tax-free allowances, and navigate the rules around additional permitted subscriptions. Whether you’re administering an estate or need advice on transferring ISA holdings, we’re here to provide tailored support. Contact us today to find out how we can make the process as smooth and stress-free as possible.

 

If you’d like more information on how we can help you, get in touch by emailing us at [email protected] or call us on 01243 782 423.