Guidance

Manage additional permitted subscriptions into an ISA

As an ISA manager, find out how to deal with additional subscriptions for the surviving spouse of a deceased ISA investor.

From 6 April 2015 additional permitted subscriptions, on top of the annual subscription limit, are available to the surviving spouse (this includes a civil partner) of a deceased ISA holder.

Additional permitted subscriptions are available in respect of deaths on or after 3 December 2014. The deceased and the surviving spouse must have been living together at the date of death. That is, not separated under a court order, under a deed of separation, or in circumstances where the marriage or civil partnership has broken down.

Managers can choose not to accept additional permitted subscriptions.

Additional permitted subscriptions:

  • can be made with the manager who held the deceased’s ISA or another manager who agrees to accept the subscriptions

  • are limited to the value of the deceased’s ISA at their date of death if the investor died on or before 5 April 2018

  • can be either the value of the deceased’s ISA at their date of death or the point the ISA ceased to be a continuing account of a deceased investor if the investor died on or after 6 April 2018

  • must be made within specific time limits

  • can be made to a cash, stocks and shares, or an innovative finance ISA

  • can also be made to a Lifetime ISA if the investor is resident in the UK, but will count towards the Lifetime ISA payment limit but not the annual overall ISA subscription limit

  • if a surviving spouse is 16 or 17, only to an ‘adult’ cash ISA

  • can be made in cash or inherited non-cash ISA assets

  • are available whether or not the surviving spouse inherited the deceased’s ISA assets

  • can be made by non-residents

  • cannot be made to (or from) a Junior ISA

  • count as previous year subscriptions for all other ISA purposes

  • can be shown on statements by any relevant description, including ‘transfer’

Where an ISA manager is notified that an ISA investor died on or before 5 April 2018, the availability of additional permitted subscriptions does not change the treatment of the deceased’s ISA and the ISA wrapper must be removed.

However where an ISA manager is notified that an ISA investor died on or after 6 April 2018 the ISA becomes a ‘continuing account of a deceased investor’ and can continue to benefit from the ISA tax advantages until the ISA ceases to be a continuing account of a deceased investor.

The ISA regulations provide authority for ISA managers to disclose the value of a deceased account holder’s ISA to their surviving spouse on request. It is for ISA managers to be satisfied that the person making the request is the deceased ISA holder’s surviving spouse.

A request by the surviving spouse should contain the deceased’s:

  • name and address

  • National Insurance Number (NINO), if known

  • date of birth

  • date of death

  • the date of marriage or civil partnership to the applicant

It should also include declarations that the:

  • applicant is the surviving spouse

  • applicant and deceased were living together at the deceased’s date of death

It’s for managers to decide whether to accept requests other than in writing. Requests may be made by someone on behalf of the surviving spouse in the circumstances set out in applying for an ISA on behalf of someone else.

The additional permitted subscription limit

Where an ISA investor died on or before 5 April 2018, additional permitted subscriptions are limited to the value of the deceased investor’s ISA at their date of death.

Where an ISA investor dies on or after 6 April 2018 additional permitted subscriptions can be either the value of the deceased investor’s ISA at their date of death or the value of the deceased investor’s ISA at the point the ISA ceases to be a continuing account of a deceased investor. ISA managers must have processes in place to ensure that the additional permitted subscriptions do not exceed the higher of these two valuations.

Stocks and shares ISA or Lifetime ISA non cash assets should be valued in accordance with the guidance within withdrawals of investments from a stocks and shares ISA or Lifetime ISA. The value of innovative finance ISA non cash assets will be the outstanding principal balance, that is the capital amounts outstanding plus any interest due but unpaid on the loans(s) at the date of death or at the point the account ceases to be a continuing account of a deceased investor.

The value of a Lifetime ISA at the date of death of an investor includes any government bonus that has accrued but not yet been paid at the date of death.

The value of a deceased investor’s Lifetime ISA at the point that the account ceases to be a continuing account of a deceased investor includes government bonuses due to be paid on subscriptions made on or before the date of death of the investor and interest accrued or gains made up to the point that the ISA tax wrapper was removed.

Where the deceased investor had a number of ISAs with the same ISA manager, there will be a single additional permitted subscription limit based on the combined values of those ISAs at the investor’s date of death. If the ISA investor died on or after 6 April 2018 the single additional permitted subscription limit can be based on the combined values of those ISAs at the date each ISA ceased to be a continuing account of a deceased investor.

The single additional permitted subscription (APS) limit must be calculated on the total value of the deceased investor’s ISAs with same ISA manager on the date of their death, or on the total value of the investor’s ISAs when they ceased to be continuing accounts of a deceased investor. The single additional permitted limit must not be calculated on a mix of some account values at the date of death of an investor and the value of other accounts at the point they cease to be continuing accounts.

However, where a deceased ISA investor held accounts with more than one ISA manager, the surviving spouse may choose to use the APS value as calculated at the date of death of death with one ISA manager and the APS value at the date of account closure with the other ISA manager.

The spouse of a deceased ISA investor is entitled to an additional permitted subscription that is higher of the value of the ISA accounts at the date of death of the investor or the value of the ISA accounts at the point they cease to be a continuing account of a deceased investor. If a spouse decides to use the additional permitted subscription calculated at the date of death of the investor, by subscribing some or all of the additional permitted subscription into their own ISA, the spouse cannot then ask the ISA manager for the additional permitted subscription as calculated on the value of the accounts at the point they cease to be a continuing account of a deceased investor.

See worked examples of the additional permitted subscription limit (PDF, 271KB, 2 pages) .

Where a legal entity’s ISA business is conducted under a number of different HMRC ISA manager references for claims and reporting purposes, the additional subscription limits can be calculated at legal entity level, or separately in respect of the deceased investor’s ISA holdings under each HMRC ISA manager reference.

Interest accrued at the date of death on cash on deposit should only be included to the extent that the ISA manager apportions the interest in accordance with paragraph 12.11. If the deceased held a number of ISAs with the ISA manager the additional permitted subscription limit will be their combined value at the date of death or their combined value at the point the accounts ceased to be a continuing account of a deceased investor.

Where an ISA pays out on death, any death benefit will form part of the additional permitted subscription limit.

Making additional permitted subscriptions

The surviving spouse can make additional permitted subscriptions with either the manager who held the deceased’s ISA or another manager who agrees to accept the subscriptions.

Once an additional permitted subscription has been made with a manager, any further additional permitted subscriptions up to the limit must be made with the same manager. Any unused balance cannot be used with another manager.

Where, in exceptional circumstances, the ISA manager is unable to accept the additional permitted subscriptions the manager should contact HMRC. This could occur when:

  • before the surviving spouse has subscribed up to the additional permitted subscription limit, the manager closes their ISA book to new business

  • the ISA manager plans a bulk transfer of accounts and the surviving spouse wishes to move their ISA and any unused part of the additional permitted subscription limit to a manager of their choice (rather than the bulk transfer default option)

Managers may accept additional permitted subscriptions on a provisional basis pending receipt of the relevant information and declarations. Where:

  • the missing information / declarations are not received within 30 calendar days

  • subscriptions accepted on a provisional basis exceed the value of the deceased’s ISA as notified by their ISA manager (see subscriptions made to another manager)

The subscription, or any excess, must be removed from the ISA, or will count towards the investor’s annual subscription limit.

When an investor is using an additional permitted subscription in a Lifetime ISA managers must not accept the subscription if either the:

Subscriptions made to the manager who held the deceased’s ISA

The subscription can be made to a cash, a stocks and shares, an innovative finance, or to a Lifetime ISA the surviving spouse holds with that manager or to a new cash, stocks and shares, innovative finance, or Lifetime ISA opened for the purpose. Or to any combination of existing or new ISAs. Managers can insist on a new ISA being opened if this will allow them to monitor the additional permitted subscription limit.

An ISA opened solely to receive the additional permitted subscriptions will not cause the saver to breach the ‘one ISA of each type per tax year’ rule. A surviving spouse can only pay £4,000 into one Lifetime ISA each tax year.

Where the deceased held ISAs with a number of different managers the surviving spouse will have additional permitted subscription limits with each manager.

Subscriptions made to another manager

If the surviving spouse doesn’t wish to make the additional permitted subscription to the manager of the deceased investor’s ISA, they can subscribe with another ISA manager who agrees to accept responsibility for monitoring the additional permitted subscription limit.

The subscription can be made to a cash, a stocks and shares, an innovative finance, or a Lifetime ISA the surviving spouse holds with that manager or to a new cash, stocks and shares, innovative finance, or Lifetime ISA opened for the purpose. Or to any combination of existing or new ISAs. Managers can insist on a new ISA being opened if this will allow them to monitor the additional permitted subscription limit.

An ISA opened solely to receive the additional permitted subscriptions will not cause the saver to breach the ‘one ISA of each type per tax year’ rule.

Where the deceased held ISAs with a number of different managers the surviving spouse will have additional permitted subscription limits with each manager. Each can be used with the manager who held the deceased’s ISA or another manager who agrees to accept responsibility for monitoring the additional permitted subscription limit.

The surviving spouse must provide the chosen ISA manager with the information and declarations required and confirm they have not made any additional permitted subscriptions to the manager who held the deceased’s ISA.

The chosen manager must send the manager of the deceased’s ISA a notice specifying that they are willing to take the additional permitted subscriptions from the spouse including:

  • the deceased’s full name

  • the permanent residential address of the deceased at the date of death

  • the date of birth and date of death of the deceased

  • the deceased’s NINO (if known)

  • sufficient information to identify the deceased’s ISA

There is no need to agree a ‘transfer’ date as the underlying ISA is not being transferred.

The ISA manager of the deceased’s ISA must, within 30 calendar days of receiving the notice, must send the chosen manager a notice confirming:

  • the deceased’s full name and NINO (if known)

  • the permanent residential address of the deceased at the date of death

  • the date of birth and date of death of the deceased

  • the value of the ISA at the date of death or the value at the point the ISA ceased to be a continuing account of a deceased investor (whichever is the higher)

  • that the surviving spouse hasn’t made any additional permitted subscriptions to them and that the manager will not accept any such subscriptions in the future, or provide details of the additional permitted subscription allowance to any other manager

Where the deceased spouse’s ISA manager has not received evidence of death, the 30 calendar day time limit can be suspended while the necessary evidence is obtained.

Where a new ISA manager agrees to accept an additional permitted subscription and the appropriate notices have been exchanged, the deceased’s ISA manager undertakes not to accept a subscription from the surviving spouse or to provide the valuations set out above to another ISA manager.

Notices from the deceased’s ISA manager must be retained by the ‘new’ manager. Alternatively, an electronic or scanned image should be retained.

In cases where the investor dies on or before 5 April 2018, the tax advantages of the ISA account cease on the date of death. However, where the death of the investor occurs on or after 6 April 2018, the account will be designated ‘a continuing account of a deceased investor’ and the tax advantages will remain until the status of the account changes. It is the responsibility of the ISA manager who held the deceased investor’s ISA to correctly calculate the additional permitted subscription that the spouse is entitled to.

However, when a bulk transfer of ISAs from an ISA manager includes a surviving spouse’s ISA to which an additional permitted subscription has been made, details of any remaining balance of the additional permitted subscription limit should be passed to the new ISA manager. This could be either the default bulk transfer ISA manager, or another ISA manager chosen by the surviving spouse as an alternative to ISA manager before the bulk transfer took place, who can continue to accept subscriptions up to that limit. If the deceased’s ISA manager could have accepted an ‘in specie’ transfer of a stocks & shares ISA, then in specie subscriptions can be made to the ISA manager receiving the bulk transfer of accounts or the alternative ISA manager chosen by the surviving spouse, so that the surviving spouse is not disadvantaged by the bulk transfer.

Where the ISA manager who held the deceased’s ISA assets ceases to offer ISAs and has not accepted any additional permitted subscriptions before the bulk transfer takes place then details of the additional permitted subscription limit should be passed to a new manager as follows:

Where the former ISA assets are transferred as part of a bulk transfer, to the ISA manager receiving the bulk transfer of ISA accounts, the surviving spouse can make additional permitted subscriptions with the receiving ISA manager, or ask for the additional permitted subscription limit to be passed to an ISA manager of their choice. The subscriptions to either ISA manager can be made in cash, or in specie (if the deceased’s ISA manager could have accepted an in specie ISA transfer)

Where the former ISA assets remain with the deceased’s ISA manager, to a new ISA manager chosen by the surviving spouse. The subscriptions can be made in cash, or in specie (if the deceased’s ISA manager could have accepted an in specie transfer).

The ISA manager should contact HMRC where exceptionally, the surviving spouse is unable to make:

  • additional permitted subscriptions with the deceased’s ISA manager or another ISA manager

  • an in specie subscription following a bulk transfer

A surviving spouse can make a single additional permitted subscription or a series of additional permitted subscriptions so long as in aggregate they do not exceed the permitted subscription limit. Whether a manager accepts a single or a series of additional permitted subscriptions is a matter for the terms and conditions of their ISA products. Where only a single additional permitted subscription is accepted the manager should make it clear to the surviving spouse that any unused balance will be ‘lost’.

Subscriptions can be made at any time from the date of death subject to the time limits.

When accepting an additional permitted subscription into a Lifetime ISA the manager must not accept a subscription if when added to other current year payments, the annual Lifetime ISA payment limit is exceeded or if an investor has already paid into another Lifetime ISA in that tax year, or is non-resident in the UK or is aged 50 years or over.

Once an additional permitted subscription has been made, a surviving spouse can transfer their savings under the normal ISA rules, with the additional permitted subscriptions being treated as previous years’ subscriptions (see annual payment limit for Lifetime ISA and transferring an ISA). Any further subscriptions counting towards the additional permitted subscription limit must continue be made with the manager who held the deceased’s ISA or the manager selected by the spouse.

Additional permitted subscriptions are treated as previous year ISA subscriptions for all other ISA purposes but in respect of an additional permitted subscription into a Lifetime ISA, the subscription counts towards the annual payment limit for Lifetime ISA.

Information and declarations

Before an additional permitted subscription can be made the surviving spouse must provide the following information to their ISA manager, the:

  • full name of the deceased

  • permanent residential address of the deceased at the date of death

  • date of birth and date of death of the deceased

  • deceased’s NINO (if known)

  • date the marriage or civil partnership with the deceased took place, and

  • identity of the account manager who managed the deceased’s ISA

This information only needs to be provided when the first additional permitted subscription is made to the ISA manager.

When making an additional permitted subscription, a surviving spouse must make a declaration confirming:

  1. They are the surviving spouse of the deceased.

  2. They were living with the deceased within the meaning of section 1011 of the Income Tax Act 2007 at the date of the deceased’s death.

  3. The subscription is made under the provisions of regulation 5DDA of the ISA regulations.

  4. The subscription is being made, in the case of ‘in specie’ transfers, within 180 days of beneficial ownership passing to the surviving spouse or in the case of cash subscriptions, within 3 years of the date of death, or if later, 180 days of the completion of the administration of the estate.

For distributions prior to 6 April 2015 in respect of deaths between 3 December 2014 and 5 April 2015, the 180 days will run from 6 April 2015.

Where a surviving spouse makes a number of additional permitted subscriptions a declaration confirming 1 and 2 above is only needed when the first subscription is made and not on subsequent occasions. The declaration confirming 3 and 4 must be made on every occasion an additional permitted subscription is made.

Exceptionally, an enduring declaration covering 1 to 4 above can cover the 3 year period from the deceased’s date of death, but only where the:

  • ISA accepts only additional permitted subscriptions

  • manager’s system prevents additional permitted subscriptions after the 3 year period unless supported by a declaration covering 3 and 4 above.

Managers can use a ‘generic’ declaration covering 1 to 4 for all additional permitted subscriptions if they choose.

Managers should accept an additional permitted subscriptions declaration in good faith unless they know it to be untrue.

The information and declarations detailed can be made in writing, or not in writing in accordance with the ISA application and transfer processes. They can be given by someone on behalf of the investor in the circumstances set out in applying for an ISA on behalf of someone else.

ISA managers must retain written documentation or scanned images. Alternatively, the manager can apply the ‘applications not in writing’ procedures. The manager must make a written declaration using the information provided on the form and send this to the investor. The original paper declaration can then be destroyed.

ISA managers can use a combined additional permitted subscription transfer application instead of separate transfer and application forms if they choose.

Industry ‘model’ application forms are available and customer information.

Additional permitted subscription – non cash assets

Where a surviving spouse inherits non-cash ISA assets, these may be used to make an additional permitted subscription ‘in specie’ (without having to be sold and the subscription made in cash) provided these assets were the ones held at the date the manager was notified of the death of the investor. The option of an ‘in specie’ subscription is not available if the spouse decides to make additional permitted subscriptions to a manager other than the one who held the ISA of the deceased.

Non-cash assets are:

  • any stocks and shares ISA, or Lifetime ISA, qualifying investments other than cash deposits

  • the following cash ISA, or Lifetime ISA, qualifying investments:

    • National Loans Act securities

    • depositary interests

    • short-term money market funds

    • money market funds

  • any innovative finance ISA qualifying investments other than cash investments.

Only inherited non-cash ISA assets can be used to make an additional permitted subscription in specie. For non-innovative finance ISA assets title to those assets must have remained with the ISA manager or his nominee. If title has moved from the ISA manager or his nominee, the assets cannot used to make an additional permitted subscription. The subscription must be made in cash instead. For innovative finance assets, the peer-to-peer loans agreements and crowdfunding debentures must have remained under the management of the deceased’s the ISA manager at all times.

For both stocks and shares ISAs and stocks and shares held in Lifetime ISAs, the value of the assets at the time the additional permitted subscription is made counts towards the additional permitted subscription limit (the value of the deceased’s ISA at their date of death). The assets should be valued in accordance with the guidance within withdrawals of investments from a stocks and shares ISA or Lifetime ISA. Where shares held by the deceased have gone x-dividend (‘XD’), the value of the dividend payments should be included in the value of the shares. Innovative finance ISA non cash assets should be valued at their date of death value, that is, the capital amounts outstanding plus interest due on the loans(s) but unpaid at the date of death.

Where the deceased investor’s account was a Lifetime ISA, the additional permitted subscription limit in respect of that account includes any government bonus accrued, but not yet paid, on the account.

When an investor died on or before 5 April 2018

The additional permitted subscription limit is not affected by any change in asset value during the estate’s administration, so if the value of the assets increase during administration it will not be possible to subscribe them all to the ISA unless the:

  • deceased held a combination of ISAs with the same manager and the surviving spouse’s single combined additional permitted subscription limit with that manager who held the deceased’s ISA is sufficient to frank the increase in value

  • surviving spouse ‘transfers in’ an additional permitted subscription limit from another ISA manager of the deceased sufficient to frank the increase in the value

In these circumstances, the combined date of death values may be sufficient to allow non-cash inherited ISA assets that have increased in value to be subscribed.

If the value of the non-cash assets decreases they can all be subscribed ‘in specie’ and a cash additional permitted subscription made to ‘top up’ to the value at date of death of the investor.

Where the assets change after the ISA manager is notified of the death of the investor as a result of some corporate action, those ‘new’ assets will be eligible for in-specie transfer.

When an investor dies on or after 6 April 2018

The additional permitted subscription limit is affected by any change in asset value during the administration period. If the value of the assets increase during the estate’s administration it will be possible to transfer them all to the ISA if the surviving spouse has not chosen to use the additional permitted subscription limit based on the value of the ISA at the date of death of the investor.

In respect of additional permitted subscriptions into a Lifetime ISA the manager must not accept a subscription if it, together with current year payments, exceeds the Lifetime ISA payment limit, or if the investor is not eligible to subscribe to a Lifetime ISA for example because the investor is 50 years of age or more or is non-resident in the UK.

Additional permitted subscriptions made ‘in specie’ with non-cash assets must be within 180 days of the distribution of the assets to the surviving spouse.

Where the estate of a deceased ISA investor makes an interim in specie distribution(s) followed by a final distribution, each will have a 180 day window for subscriptions to be made.

The time limit runs from the date the surviving spouse becomes beneficially entitled to the non-cash assets. Managers should treat this as being from the date they are formally notified that the assets are in the ownership of the surviving spouse. HMRC will take a pragmatic view but will query cases where there is evidence of avoidance or manipulation.

For distributions prior to 6 April 2015 in respect of deaths between 3 December 2014 and 5 April 2015, the 180 days will run from 6 April 2015.

Where additional permitted subscriptions are made ‘in specie’ and the manager is not providing any suitability advice to the surviving spouse, the Financial Conduct Authority have confirmed that the manager is not required to check suitability. Managers should, however, ensure the surviving spouse is provided with risk and investment information about the investments and suggest they consider taking investment advice. Risk and investment information for the relevant type of account or investments should be provided in line with the ISA manager’s standard process.

Additional permitted subscription – cash

Cash additional permitted subscriptions can be made using sums inherited by the spouse or any other cash they have available. They can be made to any combination of existing or new ISAs (see making additional permitted subscriptions). A series of subscriptions up to the value at the date of death can be made provided the total does not exceed the additional permitted subscription limit that the spouse is entitled to use.

It will not be possible to open a new Lifetime ISA for additional permitted subscriptions if the:

  • investor is not eligible to open a Lifetime ISA because they are 40 years of age or more or non-resident in the UK,

  • investor has already paid into another Lifetime ISA in that tax year

  • subscription would breach the annual Lifetime ISA payment limit.

The time limit for making cash subscriptions ends 3 years after the date of death, or if later, 180 days after the administration of the estate is complete.

Where the death of the ISA holder occurred between 3 December 2014 and 5 April 2015, the 3 year period starts on 6 April 2015, but the additional permitted subscription limit can only be the value of the deceased’s ISA at their date of death.

Reporting

All additional permitted subscriptions to cash, stocks and shares and Innovative Finance ISA are treated as previous year subscriptions so managers do not need to report the amounts received at account level; with the caveat that if made into a Lifetime ISA (to the extent that it may not breach the Lifetime ISA annual payment limit) it must be returned as a qualifying addition on the Lifetime ISA return.

For additional permitted subscriptions made in the tax years 2016 to 2017 and 2017 to 2018, providers should make a report to HMRC – outside of the annual returns process. The report should give details of the:

  • number of customers who made additional permitted subscriptions
  • the total value of those subscriptions

The return should be made to:

KAI Pensions and Savings Team
Room 2E/03
100 Parliament Street
London
SW1A 2BQ

The return (described above) may also be submitted electronically emailing savings.audit@hmrc.gsi.gov.uk with the subject heading ‘Additional Permitted Subscription Return 2016/17’ or ‘Additional Permitted Subscription Return 2017/18’:

Where, following an additional permitted subscription being made, the account is transferred out before the annual return of information is made there is no requirement on the new manager to report the account received an additional permitted subscription.

Voiding

Where, exceptionally, an ISA manager receives a void or partial repair notice after notification of the account holder’s death any additional permitted subscription limit should be recalculated.

Where the additional permitted subscription limit has been notified to a provider chosen by the surviving spouse, that provider should be notified of the revised amount.

Where subscriptions have been made by the surviving spouse in excess of the revised additional permitted subscription limit, the provider managing the account of the surviving spouse should contact HMRC. HMRC will then issue an appropriate void or repair notice.  

Published 5 April 2018
Last updated 19 July 2018 + show all updates
  1. Guidance for the additional permitted subscription limit has been updated.
  2. First published.