APS ISA guidance

proximacentauri

Hi guys,
Im posting for some info on behalf of my mum as my stepdad passed away 5 months ago and now that everything has come through in terms of the probate, my mum is now looking at investing money into an ISA or two along with what she currently holds. My stepdad held a 'Stocks and Shares' ISA which was transferred into my mums name back in March this year and was around £13K's worth of shares. Lloyds who run the ISA scheme have indicated that my mum has an allowance of £20K this tax year. Just concerned - is she not supposed to have the additional APS allowance on top of that £20K? ie. the extra £6K left over from my stepdad's previous year's ISA APS allowance?
Any help appreciated.
Not 100% sure how these APS allowances work to be honest. Is it just a one off allowance for an existing ISA - as my stepdad's ISA was transferred in March does that mean there is no more allowance going forward?
Thanks

dunstonh

My stepdad held a 'Stocks and Shares' ISA which was transferred into my mums name back in March this year and was around £13K's worth of shares

Noting the above....

- is she not supposed to have the additional APS allowance on top of that £20K? ie. the extra £6K left over from my stepdad's previous year's ISA APS allowance?

If the value was moved over previously and was worth £13k, then where does this £6k come from?

The APS is the value of the ISA at death.

Also, Lloyds are correct. The ISA allowance is £20k. It would be 20k even if there is an APS possible. APS is a different allowance that neither increases or decreases the annual allowance.

proximacentauri

Ah ok - sure I get it - it's a one off allowance for the deceased spouse's ISA holdings, if they held £2 then the surviving spouse's allowance that tax year only would increase to £20,002 only and not £40k. Rather as £20K ISA allowance and £2 APS allowance = £20,002.

bowlhead99

proximacentauri wrote: »

Ah ok - sure I get it - it's a one off allowance for the deceased spouse's ISA holdings, if they held £2 then the surviving spouse's allowance that tax year only would increase to £20,002 only and not £40k. Rather as £20K ISA allowance and £2 APS allowance = £20,002.

Yes, effectively if one member of the couple has ISA holdings and dies, the APS allows the spouse to make extra subscriptions to buy that amount of assets so that the spouse is able to end up with the same total amount of tax-protected assets as the couple previously held between them.

If the husband never got around to filling the last £6k of his allowance last tax year (or in your second example, the last £19998 of his allowance), then this won't give the wife the ability to inherit and use his 'unused investment capacity'.

The intention is just to let her maintain the level of ISAs that the couple previously had. Not to be able to take over his entitlement to make tax-protected investments in the 2018/19 tax year where he had not wanted to do so himself.

Reed_Richards

proximacentauri wrote: »

Ah ok - sure I get it - it's a one off allowance for the deceased spouse's ISA holdings, if they held £2 then the surviving spouse's allowance that tax year only would increase to £20,002 only and not £40k. Rather as £20K ISA allowance and £2 APS allowance = £20,002.

ISAs transfers, [STRIKE]including transfers from a deceased spouse[/STRIKE], simply do not count against your ISA allowance. Your mum has a £20k ISA allowance this tax year. This means she can put up to £20k of new money into an ISA; that's all there is to it.

Alexland

Reed_Richards wrote: »

ISAs transfers, including transfers from a deceased spouse, simply do not count against your ISA allowance.

You don't do an ISA transfer from a deceased spouse - you get an additional permitted subscription.

Reed_Richards

Alexland wrote: »

You don't do an ISA transfer from a deceased spouse - you get an additional permitted subscription.

You are absolutely correct. Why make things simple when you can make them complicated?

If the deceased died on or after 6 April 2018, their ISA will become a 'continuing ISA'. It will keep this status until the earliest of:

The completion of the administration of the estate
The 3rd anniversary of the date of death
The closure of the ISA due to all the funds being withdrawn
In this case, the APS is equal to the higher of the value of the ISA on the date of the investor's death or the value of the ISA on the date it stops being a 'continuing ISA'.

bowlhead99

Reed_Richards wrote: »

Why make things simple when you can make them complicated?

The reason tax law is not simple, is: although people often think that their own circumstances are straightforward and could be adequately and fairly dealt with by applying solution 'x,' so the simple rule 'x' should be what is implemented as law... that solution would not be a fair outcome for people with a whole range of circumstances which the proponents of the 'simple rule' have not had any personal cause to consider.

badger09

bowlhead99 wrote: »

The reason tax law is not simple, is: although people often think that their own circumstances are straightforward and could be adequately and fairly dealt with by applying solution 'x,' so the simple rule 'x' should be what is implemented as law... that solution would not be a fair outcome for people with a whole range of circumstances which the proponents of the 'simple rule' have not had any personal cause to consider.

Sadly, that's not the only reason:(