The Lifetime ISA

The Lifetime ISA  – The chancellor announced in his recent budget that adults that are currently age under 40 will be able to save up to £4000 per annum in a new Lifetime ISA from 6th April 2017.

Even better news the government will add a 25% bonus to that amount. The monies saved must be used for house purchase or retirement savings. If you remove your monies early you will have to pay any bonus amounts plus pay a 5% penalty.

You can build up significant sums in ISA investments over a lifetime, if you haven’t so far achieved this then the recent announcements of increased ISA allowances of up to £20,000 per annum from 2017 will make this far more likely in the future.

Beyond Your Lifetime ISA ?

Are you aware that since the Autumn 2014 Annual Statement by Chancellor George Osborne that any accumulated ISA investment pots can be passed to a surviving spouse or civil partner on death.

These changes to the ISA rules were further confirmed in the 2015 budget, meaning you can now inherit an ISA allowance on death.

How does this work?

The spouse or civil partner who inherits will be given a special one off ISA allowance equivalent to the value of the deceased ISA allowances.

Who is most likely to benefit?

The most likely beneficiaries of these changes are the wealthy, who have established family trusts to pass the majority of their wealth onto the next generation.

It could also be a trap for the unwary, who inherit their partners ISA’s but fail to take advice on protecting both the value of the combined ISA portfolios and the rest of their estate from IHT.

Although this is a welcome change to ISA rules, it would seem sensible for people with assets over £1.5 Million to seek out take advice at an early stage on how to avoid payment of Inheritance tax on their estates.

Ray Best is a resilient Financial Planner with a unique approach to investment planning, his work ethic has propelled him from humble beginnings to be voted as a top UK Financial Planner by Vouched For (as published in the Sunday Times). These days he works with families with large investment portfolios or big inheritance tax liabilities, the first step, is to book a Discovery Meeting HERE.

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