A Legal Way to Go Over the ISA Limit: The Overlooked APS Rule
Most people know you can put up to £20,000 a year into an ISA. That’s the annual allowance, and it lets you build savings and investments in a tax-efficient way.
But there’s a little-known rule that allows you to go over that £20,000 limit in certain circumstances, and it’s one of the most underused ISA rules out there. It’s called the Additional Permitted Subscription (APS).
What is APS?
If your spouse or civil partner passes away, you’re allowed to inherit their ISA allowance. This is called the APS allowance.
Here’s how it works:
Normally, you can put up to £20,000 into an ISA each tax year.
With APS, you can apply for an additional allowance equal to the value of your spouse or partner’s ISA when they died.
For example, if they had £100,000 in their ISA, your own allowance isn’t just £20,000 that year, it’s £20,000 plus £100,000. In other words, you could put in £120,000 and keep all the tax advantages that come with ISAs.
The Mistake Most People Make
This is where so many families miss out.
When someone loses their spouse, their focus quite rightly isn’t on tax rules. They inherit the ISA money, and often move it into a standard savings account or investment account without thinking twice.
The problem is:
Those accounts are fully taxable.
Income, capital gains, and dividends all start getting taxed.
Over time, that can mean tens of thousands lost unnecessarily to the taxman.
All because they didn’t realise the money could have been sheltered inside an ISA again by using the APS allowance.
Do You Have to Inherit the Money Itself?
Interestingly, no. You don’t need to inherit the ISA funds directly to make use of APS. The key is the allowance. You’re entitled to it whether or not the ISA money itself comes to you.
That means if you’ve got other funds available, you can still use the APS to move those into an ISA, protecting them from future tax.
The Crucial Time Limit
There’s a strict deadline: you must apply for APS within three years of your spouse or civil partner passing away.
Miss that window, and the opportunity disappears. Sadly, this is where many people get caught out. They only discover the option years later, by which time it’s too late.
Why It Matters
The tax advantages of an ISA are significant:
No income tax on interest or withdrawals
No capital gains tax on investments
No dividend tax on shares held inside the ISA
By using APS, you can save large sums in tax, protect your spouse’s legacy, and give your own savings far more room to grow.
What You Should Do
If this could apply to you or your parents:
Speak to the ISA provider and ask about the APS allowance.
Confirm the amount of the allowance.
Check the timing - make sure you’re within the three-year window.
It’s one of those little-known rules that can make a very big difference.
This article is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
The favourable tax treatment of ISAs may be subject to changes in legislation in the future.