Additional Permitted Subscription: The Lesser Known ISA


Cash ISAs, Stocks and Shares (S&S) ISAs, Junior ISAs (JISAs), they are all reasonably well known when it comes to ISA planning. But what about the Additional Permitted Subscription (APS)? The ‘what?’ I hear you say. Well let me explain but first let’s start at the beginning.

Individual Savings Accounts or ISAs as they are more commonly known as were first introduced back in 1999 as replacement for Personal Equity Plans (PEPs). First introduced as Mini and Maxi ISAs, they permitted up to £7,000 to be invested via an S&S Maxi ISA. Alternatively, you could invest £3,000 to be invested into a Cash Mini ISA and £4,000 into an S&S Mini ISA or £3,000 into an S&S Mini Isa with £1,000 into the short lived and largely unpopular Insurance Mini ISA.

Over the years, there have been various increases in the subscription levels and numerous rule changes regarding how this may be vested. However, the current £20,000 annual subscription limit may be split between cash and stocks & shares in whatever way the investor sees fit.

Suffice to say that after making use of these limits each and every year will leave one with a substantial six figure ISA portfolio. So should an investor die, it is not uncommon to see a significant value held within an ISA wrapper.

When dealing with surviving spouses or civil partners, as part of the estate planning, there can often be a discussion regarding monies being invested and if so via what wrapper is often a consideration.

ISAs are extremely popular as they are very tax efficient. Dividend income / interest within and income withdrawals are not subject to Income Tax and capital growth within and capital withdrawals are not subject to Capital Gains Tax (CGT). They do form part of an estate for purpose of Inheritance Tax (IHT) planning, although there is a legitimate avoidance of this too depending on the type of underlying assets one is prepared to invest in. So ISAs are often used to shield an investor from Income Tax & CGT. However, one can only invest £20,000 per annum into an ISA and consequently it could take a considerable number of years to wrap all the proceeds up in ISAs, unless a beneficiary makes use of their APS.

Surviving spouses or civil partners who were living with the deceased at their date of death may exercise their APS. This one off ISA allowance facilitates all monies already in an ISA to be transferred across as ISAs, leaving their own ISA allowance in tact.

Where the beneficiary wishes to transfer these without the need to convert to cash, (known as transferring in-specie) the transfer from the deceased’s ISA must be concluded within 180 days of the beneficial ownership passing to them. This facility would perhaps prove most useful at present, given that market conditions during the current pandemic are not proving favourable for equity valuations, allowing one to avoid crystallising losses.

Where cash subscriptions apply, this must be within 3 years of the date of death or if later than 3 years within 180 days of completion of the administration of the estate.

Should you wish to discuss your estate planning and / or ISA planning, please feel free to contact us for an initial informal chat.