Savers hit by ISA tax charge

Thousands of bereaved partners in the UK could be paying unnecessary tax on inherited ISAs, by missing out on a tax break.

Introduced in 2015, the additional permitted subscription means the spouse or civil partner of someone who has died can inherit the deceased's ISA without a tax charge.

However, a freedom of information request by Zurich suggests only 21,000 people took advantage of the rule in the 2017/18 tax year - an estimated 14% of the people entitled to it.

As the average value of an inherited ISA stands at £55,000, this could mean savers are paying £110 a year in tax they did not need to pay.

Alistair Wilson, head of retail platform strategy at Zurich, said:

"Despite being in its fourth year, the take-up of this tax break looks shockingly low.

"People who miss out on the allowance will be hit by a tax bill that quickly eats into the returns on their savings and slows down the growth of their nest egg."

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McKenzies is registered to carry on audit work in the UK and is regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. A list of partners’ names is open to inspection at 2 Station Road West, Oxted, Surrey RH8 9EP. Copyright © McKenzies. All rights reserved.