Tax-free ISAs to be passed to surviving spouses

ISAs will no longer be liable for tax when inherited by spouses from April 2015, the chancellor, George Osborne, has announced in his autumn statement.

Currently, a spouse or civil partner inheriting an ISA is liable for tax on the savings. But from 6 April 2015, they will be able to add their late spouse's ISA to their own without a tax charge, and will continue to benefit from these tax-free returns. The change will affect about 150,000 married partners, though no mention was made of excluding assets in ISAs from inheritance tax.

A statement from the Treasury said: 'From 6 April 2015, surviving spouses will be able to invest as much into their own ISA as their spouse used to have, on top of their usual allowance, and so will be better able to secure their financial future and enjoy the tax advantages they previously shared.'

The chancellor also said that he would announce the rate of return for the new pensioner bonds next year, which will be open to all 11 million people in the UK over the age of 65.

There will be a 1-year bond, likely to pay about 2.8% in interest, and a 3-year bond, expected to pay around 4%. A total of £10bn of the bonds will be issued, and these are expected to sell quickly.

In addition, thousands of retirees who have pension annuities will be able to pass on the benefits free of tax. So anyone whose spouse dies before they are 75 will be able to take any retirement income from an annuity due to them tax-free (they are currently liable for a 55% tax on annuities).

However, the changes will only apply to payments made after April 6 this year, and do not cover members of final-salary pension schemes.