What is the additional permitted subscription for ISAs?

Hello! Hope you’re all well and enjoying your summers – we’re back from our respective holidays and parental leave and ready to get cracking on your questions again.

Today’s topic was less of a question and more of a highlight from a reader of an area that’s useful for women – who tend to live longer than men – to know about (although we reached out to Hargreaves Lansdown to clarify some aspects!)

It’s that any ISA can effectively be inherited by a surviving spouse or civil partner if their partner died on or after 3 December 2014. You don’t inherit the money that’s in your partner’s ISA though, instead you get that amount added to your own ISA allowance.

So, if your partner had £5k in their ISA when they died, you’d be able to save £5k more tax free that year – so £25k – and they could potentially give the actual money away in their will or whatever they have arranged.

This is known as the additional permitted subscription and was introduced in 2014 by then-chancellor George Osborne.

Now, there’s slightly different ways that this works depending on whether you’re inheriting the allowance of a cash ISA or a stocks and shares ISA. With a cash ISA the value you’d get is the total amount they had in their cash ISA, and you have the later of three years and 180 days after all their finances have been sorted, basically, to get that allowance added on.

For stocks and shares ISAs, because the value of their ISA might go up and down while everything’s being sorted out, if they died after 6 April 2018 then the value of the allowance you’d get is the highest number of either: the ISA’s value when your partner died, the value when their finances were all sorted, the third anniversary of their death, or the closure of their ISA because the money has been withdrawn. If they died between 2014 and 2018 then the value is just what the ISA was when they died. For these there is a 180-day time limit for getting your additional permitted subscription.

You don’t have to use the additional allowance with the same ISA provider your partner did, but you do need the following to apply for the extra allowance: partner’s date of birth, your national insurance number and your partner’s (ideally), date of death, date of marriage or civil partnership, your partner’s address.

Not the cheeriest of topics to come back from the holidays with, as our reader pointed out, but a potentially useful one nonetheless! Let us know if you have any questions about this – it’s a fairly dense topic – and keep sending us all your finance, money and economics questions as your action of the week.