There is a useful benefit of tax-free cash Isas that is not well known and is often hard to find on providers’ websites.
It goes by the name of the additional permitted subscription, or APS for short.
Not all providers offer them – including a major building society and many top payers on easy-access accounts.
The APS gives you a one-off extra Isa allowance following the death of your husband, wife or civil partner.
As the surviving spouse or civil partner, you are entitled to an extra Isa allowance equal to the amount they held in cash Isas with any number of providers. You can then carry on earning tax-free interest on the money.
You don’t inherit the Isa, but can use the money to open one in your own name. Crucially, it does not count towards this year’s £20,000 allowance but comes on top. Broadly, you have three years from the date of death to use it.
Check your provider: The additional permitted subscription benefit gives you a one-off extra Isa allowance following the death of your husband, wife or civil partner
But if administering the estate takes longer than this, you have up to an additional 180 days after it is complete.
You need to ask each of your late partner’s Isa providers for a certificate that says you are entitled to this allowance. Ask your chosen provider to organise the transfer directly into an Isa in your name.
Under the Isa rules, you can open your new Isa with the existing provider or move it to a new one. But if you want to use the same provider, they can choose whether they will accept the APS – and many don’t.
Providers that often appear among the best buys that don’t accept them include Marcus, Shawbrook Bank, Paragon, Charter Savings Bank, Kent Reliance, Leeds BS, Close Brothers, Cynergy, Ford Money, Hodge Bank, Secure Trust, Vida Savings, United Trust Bank and app-based accounts Tembo, Chip, Moneybox and Plum. Paragon and Plum tell me that they hope to do so soon.
The big banks that do include Barclays, Halifax, HSBC (but only if you have a current account with it), Lloyds, NatWest, Santander and Virgin Money. But their easy-access rates are generally below 1.5 per cent.
National Savings & Investments accepts the additional allowance paid into its Direct Isa, paying 3.5 per cent.
With cash Isas under threat from Rachel Reeves, it is crucial that you make the most of them now.
