Since 1 July 2014 individuals have been able to pay £15,000 per annum into an ISA. The ISA can be held in shares, cash or any combination of both.
The returns made on the assets held within the ISA are exempt from income and capital gains tax.
On death an individual can pass their ISA to their spouse or civil partner free from inheritance tax; however the transferred fund has, to date, lost its other tax advantages on transfer.
From April 2015, the ISA allowance will rise to £15,240.
More importantly, for deaths from 3 December 2014, where the deceased had an ISA, the surviving spouse or civil partner will receive an additional ISA allowance. This additional allowance, available from 6 April 2015 will be equal to the value of the ISA held by the deceased at death.
These changes will make ISAs even more attractive to married couples, enabling potentially large pots of tax exempt investments to be accumulated. It needs to be remembered, however, that the investments will still be subject to inheritance tax and will lose their tax exempt status if left otherwise than to a surviving spouse or civil partner.