Autumn Statement 2014: Isa limit raised and death tax abolished
People will be able pass on their Isas to their spouse when they die tax-free, Chancellor George Osborne has announced in his Autumn Statement.
According to the Treasury, around 150,000 people a year lose out on the tax advantages of their partner's Isa when they pass away, even if the couple have saved the money together.
But from today, the Chancellor has abolished the penalty, meaning a surviving spouse will be able to receive their partner's Isa benefits.
According to Hargreaves Lansdown the mechanics will be a little 'clunky' - as of today the Isa wrapper will still effectively be lost on death and the money transferred to the spouse as part of the estate. However the surviving spouse will then be given an additional one-off allowance equal to the amount the deceased had in their Isa, which would become available from April 6th.
Osborne also announced that the amount an individual can save tax-free into any combination of cash or stocks and shares Isas as they see fit will rise by £240 to a total of £15,240 for the 2015/16 financial year on 6 April 2015.
Rebecca O'Keeffe, head of investment at Interactive Investor, said: "The previous Isa rules meant that all the benefits of an Isa were lost at the point of death, but the new rules, which come into effect from today, are a welcome addition and allow the tax advantages of married savers to be inherited by their surviving spouse or civil partner.
"This has long been an anomaly and these changes a welcome boost for investors. This news, combined with confirmation of the end of death taxes and even more additions to how pensions can be passed on tax efficiently, make saving for your financial future even more attractive."
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.