Another Inheritance ISA question please for the experts?

Sallyforth

So now I have confirmation from Yorkshire Building Society that the value of my late husband's APS allowance has been passed to them by Kent Reliance who do not provide these ISAs.

The value is £44,000 and I have that cash sat in a Zopa easy access account making 4.45% interest on a daily basis so all good.

My question is would I be better putting these funds into a fixed rate bond at say c. 5% for either one or two years and THEN make use of the APS allowance. I lost quite a lot of income when my husband recently died eg state pension, annuity, benefits so until I reach state pension age in August 2028 my own finances are a little stretched. I do have enough savings from past inheritance to provide me with monthly interest income etc but not enough for a particularly comfortable lifestyle without dipping into capital (or resuming work which I'd like to avoid!). I'd rather wait until I get my full State pension before releasing my private pension (which is currently only £85K) and using capital. I have no mortgage and low utility bills etc.

I believe I have 3 years from the date of death to make a decision? Probate and administration of the Estate is now all complete so the 180 days ruling is irrelevant.

Thoughts most welcome and with thanks.

eskbanker

Worth bearing in mind that interest earned on that money will currently be taxable, although the amount of tax will depend on the allowances you have, so getting it wrapped again within the ISA shelter (and then earning about 5% on it) is something to consider instead?

Sallyforth

Thank you - I probably didn't make it clear I don't have any earned income other than interest on savings which amounts to less than the c. £18k I can earn. I do have ISAs and premium bonds so some of my "income" is already tax free. Once I receive my state pension that will push me into the lower tax bracket - just! This is why I think perhaps earning a bit more regular monthly income would help me right now?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82170836#Comment_82170836

Fair enough - one other thing to consider is to start withdrawing from your private pension rather than waiting until you're a taxpayer again in a couple of years time, when all such withdrawals (beyond the 25% tax-free) will be taxed? This would potentially make better use of your personal tax allowance, but more accurate figures would be needed to support a proper evaluation…

Yorkie1

 I don't have any earned income other than interest on savings which amounts to less than the c. £18k I can earn

Bear in mind that if you earn more than £10K savings interest or dividends (excluding ISAs), you are likely to need to do a self-assessment tax return (even if tax isn't then payable), I believe.

Sallyforth

Thank you - I’ve submitted self assessments for the past 3-4 years since taking early retirement when I inherited my late Dad’s estate so familiar with this.

LHW99

https://www.gov.uk/individual-savings-accounts/inheriting-an-isa-from-your-spouse-civil-partner

This page makes it clear that you have 3 years from date of death, as you thought.

xylophone

Had you considered using APS now and starting to draw down your private pension?

The 25% tax free should assist your financial situation; you could then draw down within your personal allowance until the pension was exhausted.

Depending on your situation, you might even consider deferring your state pension?