The largely unknown ISA allowance that can fill a serious advice gap

Largely unknown, yet widely available, the Additional Permitted Subscription (APS) is a highly beneficial allowance for surviving spouses or civil partners of ISA investors.

This legislation grants ISA holders the ability to pass the entire value of their ISA to their partner after death. Simply put, the APS works in the form of a one-off increased ISA allowance which is on top of their own £20,000 annual ISA subscription.

However, under recent rule changes, APS subscriptions now have multiple time limits and can lose their tax efficiency if put off for too long.

Advisers have a critical role to play in facilitating these conversations and offering the right advice in this area – to ensure that the client’s beneficiaries receive the maximum inheritance possible.

APS allowance claims surprisingly low

According to Moneywise, as little as 14% of eligible partners in the UK reportedly made use of their annual APS allowance in 2017-18.

As a result, advisers have a critical role to play in facilitating these conversations and giving the right advice in this area – to ensure that the client’s beneficiaries are receiving much needed financial stability during a difficult time.

With nearly £70bn being sheltered by ISA investors the number of recorded APS claims surprisingly low. There is a great opportunity for advisers to write new business by touching base with their existing clients that are either confused by the APS allowance or have yet to seek proper financial advice themselves.

Time limits advisers need to know 

According to HMRC guidance, APS can be made at any date from the date of death up to the time limits given below, depending on the form of the subscription.

  • Where the survivor is the beneficiary of the ISA assets, and they want to transfer these without the need to convert the asset to cash (known as transferring in specie) the transfer from the deceased’s ISA must be completed within 180 days of the beneficial ownership passing to them.
  • For cash subscriptions the APS allowance must be used within three years from date of death, or if later than three years, within 180 days of the completion of the administration of the estate.

Utilising APS rules effectively

For advisers with clients who are couples with large ISA holdings, staying up to date with the latest APS regulations is an opportunity to retain client control, ownership and access to their capital.

Although the rules around ISAs can appear complicated, we have an informative guide on APS and client case study for a more in-depth look into how APS can be used to maximise tax-efficiency.

For more information on Additional Permitted Subscriptions download our two-page guide or read our client case study on retaining client control and maximise tax-efficiency.

Download our APS Guide Read our APS Case Study


Making ISAs IHT-efficient

Although ISAs have always possessed generous lifetime benefits, without any tax planning, clients who take out a new ISA will be fully liable to a 40% inheritance tax bill.

Stellar AiM ISA Inheritance Tax Service

By using the Stellar AiM ISA Inheritance Tax Service, you are able to transfer your clients’ existing ISAs to obtain 100% IHT relief. The Stellar AiM ISA Inheritance Tax Service invests in a diverse range of up to 40 AiM quoted companies that qualify for Business Relief (BR).

To learn more about how this type of investment can work for your clients, visit our dedicated web page here.

Written by Jonathan Simmons