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In the run up to the end of the tax year you’ll see increased promotion by advisers and product providers reminding you to use your annual NISA allowance. NISA is of course, the new terminology being used for ISAs since July 2014.
You can invest a maximum of £15,000 by 5 April 2015 and a further £15,240 from 6 April onwards, so there isn’t long left to use the allowance if you haven’t already.
This is a use it or lose it allowance, but are you aware of the change to NISA death benefits?
In this year’s Autumn Statement, the Chancellor announced changes to the tax position of NISAs upon the account holder’s death. These state that the NISA holding will retain the tax efficient status and can be passed on to the spouse or civil partner with the same tax advantages that the account holder had benefited from. Prior to this all NISAs lost those benefits, which meant that the spouse or civil partner was potentially liable to Income Tax and/or Capital Gains Tax on the total value, which most people in the UK deemed to be rather unfair.
Whilst this was an unexpected announcement it was welcome nonetheless, as this means that UK residents can continue to build up wealth and accumulate savings tax efficiently.
If you are using NISAs as a method of long term saving, with the intention of passing your accumulated wealth to your family members, it is worth noting that there has been no amendment to the Inheritance Tax (IHT) position on death. The value of all NISAs will still form part of your estate for IHT purposes. The only exception to this is if the investment qualifies for Business Property Relief by holding Alternative Investment Market (AIM) listed securities within the NISA. Be aware though that investing in AIM listed securities is a high risk strategy and subject to specific rules.
Should you be in a position where IHT is your primary concern and the value of your estate (including the value of your NISA holdings) is close to, or has already exceed the current IHT threshold of £325,000 (or £650,000 in the case of a married couple or civil partnership) in England and Wales, you should seek professional advice. A financial adviser can work with you to help plan and mitigate any tax which may become due. IHT is after all, technically a voluntary tax and there are a wide variety of solutions available.
As mentioned in one of our previous blogs, it is also worth reviewing your will, as you may wish to ensure that your NISA holdings are transferred to your spouse or civil partner. It is also worth noting that there was a change to intestacy rules, which came into effect in October 2014. These dictate what happens to the value of your estate and assets when you die without having made a will.
If this article raises any questions or concerns, please contact one of our Tax Consultants or Financial Planning Consultants at one of our 15 office locations for assistance.
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