ISAs - Additional Permitted Subscription

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What is the Additional Permitted Subscription?

In 2014, the then Chancellor George Osborne announced in his Autumn Statement that an ISA could be inherited by a surviving spouse or civil partner. This inheritance effectively takes the form of an increased ISA allowance. This is known as the Additional Permitted Subscription.

How does the APS work?

Where a spouse or a civil partner died on or after 3 December 2014, the survivor can apply for an additional ISA allowance, known as the APS. 

Where the deceased died before 6 April 2018, the APS allowance is equal to the value of the ISA on the date of death. For example, if a spouse or civil partner died on or after 3 December 2014 but before 6 April 2018 with an ISA valued at £100,000, this would be the survivor’s APS.

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

• The completion of the administration of the estate;
• The third anniversary of the date of death; or
• The closure of the ISA due to all the funds being withdrawn. 

A continuing ISA means that the deceased’s ISA will remain sheltered from tax and will be passed on in its entirety to a spouse or civil partner tax free. No money can be paid into the ISA from the point of death but it will continue to benefit from the tax advantages of an ISA, so growth inside the wrapper will remain tax free. 

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.

Where an investor held ISAs with several companies, a separate APS will be available for each one. 

Who is eligible for the APS

An individual whose:

1. Spouse or civil partner died on or after 3 December 2014; and
2. They were not separated or estranged from their spouse or civil partner.

The APS is separate from the ISA allowance so does not affect it. The ISA allowance is currently £20,000 for the 2020/21 tax year. Therefore, the surviving spouse or civil partner can use their allowance in the normal way, in addition to any APS. 

For example, if a spouse died on 10 January 2019 with an ISA valued at £100,000, the survivor could contribute £120,000 (£100,000 plus £20,000) to their ISA for the 2020/21 tax year. 

How can an APS be made?

Cash: investors can make a cash contribution using their own cash or cash inherited from the deceased.

Investments: investments held in the deceased's ISA can also be transferred into the surviving spouse or civil partner's ISA directly without needing to be sold. However, investments can only be transferred into an ISA with the same company with which the deceased held their ISA.

For example, where both the deceased spouse and the survivor had VitalityInvest ISAs, the investments held within the deceased’s ISA could be transferred directly into the survivor’s ISA. Where the deceased spouse held an ISA with another provider, the survivor could make a cash contribution to their own VitalityInvest ISA.

Where the value of any inherited ISA investments is less than the APS (for example, where the value of investments have gone down since the date of death), a top up payment can also be made with cash.

If the deceased died between 3 December 2014 and 5 April 2018 and the value of any inherited ISA investments is greater than the APS (for example, where they have risen in value since the date of death), investments can only be transferred into the ISA up to the value of the APS.

Are there any time limits to use the APS?

An APS made as investments or stock must be completed within 180 days of the distribution of the assets to the surviving spouse.

An APS made as cash is available until the later of:

• Three years after the date of death; or
• Up to 180 days after the administration of the estate is completed.

Important Information

The information provided is based on our current understanding of the UK legislation and may be subject to amendments as a result of changes in legislation.

All references to taxation are based on our understanding of current UK taxation law and may be affected by future changes in legislation, the individual circumstances of the investor and pension scheme conditions.

The information provided in this article is not intended to offer advice.