Additional permitted subscription

etienneg

I'm specifically thinking here of cash ISAs.

If I understand correctly, when your husband or wife (or civil partner) dies you are allowed an additional permitted subscription (APS) equal to the amount that was held in their ISAs at the time of their death. Their ISAs have to be closed as part of winding up their estate, but you can make an extra subscription up to the APS into a new or existing ISA (or maybe more than one ISA?) in their name.

What I don't understand is why some financial institutions offer an ISA specially named for this purpose (such as 'inheritance ISA'). Can't you just use any ISA on offer?

Once the money is in an ISA in your name, does it have any special status or can you transfer it as you could for any other ISA?

masonic

There is no HMRC-imposed restriction. Some ISA providers might have difficulty making their systems accept the additional permitted subscription. But if you are forced to use a 'special' ISA that isn't your preferred option, you'd be free to transfer out to a conventional ISA.

Wildsound

I'm curious to know who/where you heard about a product called 'inheritance ISA'?

Not to be mistaken for ISAs with Inheritance tax in mind, that is something different.

There's no separate status for them, you're just essentially given a "one-off ticket" to deposit more than the annual allowance into an ISA, as per the APS amount.

etienneg

masonic and Wildsound: Thank you both for your informative and reassuring replies.

Wildsound: "Inheritance ISA" is what Nationwide call the specially named ISA I spoke about. See https://www.nationwide.co.uk/products/isas/isas

Wildsound

etienneg wrote: »

masonic and Wildsound: Thank you both for your informative and reassuring replies.

Wildsound: "Inheritance ISA" is what Nationwide call the specially named ISA I spoke about. See https://www.nationwide.co.uk/products/isas/isas

Looks to me like they don't want to complicate their admin of a regular ISA with the (previously more) complex APS allowance over the top of it so have just created a separate account for it. From my experience, a lot of providers generally accommodate an APS subscription without the need for a separate account. However, it would be worth contacting a provider/bank/building society to see what they do. There's no benefit to have an exclusive account, and looks to me more like a combination of them separating their admin combined with a kind of marketing twist on it.

Newcomer1234

I don't know if its any help but just in case.................
The ISA allowance can be transferred to the surviving spouse BUT we were advised that not all providers will accept a transfer in AND the account to transfer in to needs to have been set up before the death happens. So it restricts the choice of providers somewhat. Still worth doing though in most cases I would imagine.

eskbanker

Newcomer1234 wrote: »

I don't know if its any help but just in case.................
The ISA allowance can be transferred to the surviving spouse BUT we were advised that not all providers will accept a transfer in AND the account to transfer in to needs to have been set up before the death happens.

It would be somewhat more helpful if you gave specifics!

The reference to 'not all providers will accept a transfer in' may be a misunderstanding, as additional permitted subscriptions aren't actually transfers as such - are you aware of specific providers that wouldn't accept an APS?

Likewise, who told you that 'the account to transfer in to needs to have been set up before the death happens'? It sounds like the sort of made-up 'rule' that Barclays would invent....

Robert_McGeddon

Newcomer1234 wrote: »

The ISA allowance can be transferred to the surviving spouse BUT we were advised that not all providers will accept a transfer in AND the account to transfer in to needs to have been set up before the death happens.

Absolutely not the case in my experience. I've had to do 4 APS 'transfers' in the past year and have had no issues with opening a new account at the existing provider or a new one.

However, for S&S ISA's:
1 In-specie transfer very difficult - easier to deal with as cash, and
2 In most cases the transfer to the new account was not effected directly. Instead, the old ISA provider advised the new ISA provider of the amount eligible as an APS but paid the cash into my personal bank account. It was then up to me to transfer the funds into the ISA account of the new provider.

HTH,

Alexland

Wildsound wrote: »

Looks to me like they don't want to complicate their admin of a regular ISA with the (previously more) complex APS allowance over the top of it so have just created a separate account for it.

If anything it could make it more complicated as the Nationwide Inheritance ISA doesn't allow transfers in of an existing Cash ISA that the surviving partner may have already made contributions into during the current tax year. As such they would need to get their head around the Split Cash ISA rules and transfer their Cash ISA to a different Nationwide ISA product. Plus the rate is bad so they would then want to quickly transfer it out again.

Alex

etienneg

Thanks for all the helpful replies. I feel better informed now.

Alexland: One of the sources of information I've discovered is here:
https://www.gov.uk/guidance/manage-additional-permitted-subscriptions-into-an-isa

According to this (section immediately after Overview, bullet point 12 of 13), additional permitted subscriptions count as previous year subscriptions for all other ISA purposes. My reading of this is that an APS is treated like transferring in previous year ISA cash. As such it would have no effect on current year subscriptions for the surviving spouse and so split cash ISA rules are irrelevant here.

I do agree with you, though, as regards the need to transfer out quickly because of the poor rate!