Bereaved spouses may be paying unnecessary tax on ISAs

Bereaved spouses may be paying unnecessary tax on ISAs

A new Freedom of Information request has revealed that last year only 21,000 people took advantage of a tax scheme that allows a surviving partner to expand their ISA allowance to include funds from their deceased spouse’s accounts.

It is estimated that 150,000 people a year inherit an ISA from a spouse, which means that only 14 per cent are using the little-known incentive.

Introduced way back in 2015, the scheme, known as the ‘additional permitted subscription’, allows the surviving spouse to collect their partner’s savings without penalty during that tax year.

Official figures show that the use of the tax perk remains low since its launch, with only 61,000 partners claiming the allowance so far.

However, HMRC has said that of those that did use the subscription, the average amount that bereaved spouses received via the extra allowance was £55,000.

Unfortunately, not all providers are obliged to accept a transfer of the allowance, which is why current figures may remain so low.

Steve Horton, a Partner with Milsted Langdon Financial Services, said: “At such an emotional time, a bereaved spouse may not give much thought to the transfer of savings such as ISAs. At such a difficult time, it is important to seek independent financial advice from someone who can help you take stock and provide objective advice and information to protect the savings and investments that your loved one worked hard to accrue.

“No-one wants to pay HMRC more than is due. If you or a family member are dealing with bereavement, contact us and we can arrange a full financial review.”