ANALYSIS
NEWS
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THE INVESTOR
AUTUMN STATEMENT
TAX BOOST FOR WIDOWS AND WIDOWERS
Death is becoming a less costly event, at least as far as tax is concerned, after
George Osborne announced in his Autumn Statement that money held in ISAs
will retain their tax-efficient status after they are inherited by widows and widowers.
That comes in addition to the abolition of the ‘death tax’ on pension funds,
announced earlier by the Chancellor, which is explained in more detail on page 9.
From 6 April, bereaved spouses will benefit from a one-off additional ISA allowance
equivalent to the amount invested in an ISA wrapper by their deceased partner, which
will retain the same tax advantages.After probate has been granted, the funds will be
transferred into a new ISA, in the name of the surviving spouse.The spouse will still be
able to invest their own annual allowance – which is to be increased from the current
£15,000 to £15,240 a year from 6 April.
The change has no impact on the Inheritance Tax that could be payable on ISAs left
as part of estates worth more than the nil-rate band, currently £325,000.
The Treasury calculates that the average ISA value for over-65s is £29,880, so the cost
to the Exchequer in lost Income Tax on dividends (for higher rate and additional rate
taxpayers) and Capital Gains Tax on disposals will not be significant – the government
says it will be negligible in the first few years, rising to about £10 million by 2019/20.
The saving could, however, be valuable for couples with sizeable ISA funds and everyone
should review their wills to make the most of this new concession, because if investments
in an ISA are left to someone other than a spouse they will lose the tax exemption.
The announcement chimed with an Autumn Statement that contained a few
eye-catching announcements, but no significant tax reductions, as the Chancellor
grapples with a budget deficit that remains significantly above previous forecasts.
Other measures made with one eye on the upcoming general election include the
introduction of a tiered system of Stamp Duty on home purchases.The Chancellor says
this will mean 98% of home buyers will pay less than under the current system –
although the 2% who suffer could end up paying substantially more, given that the
top rate of duty will rise to 12% on homes worth more than £1.5 million.
