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Managing LISAs on death or terminal illness

Newsletter issue - August 2020.

Lifetime ISAs (LISAs) continue to provide a tax-efficient savings vehicle for investors as there will be no income tax to pay on interest earned and no capital gains tax to pay on subsequent profits arising on the money invested. Up to £4,000 a year can be invested in a LISA, with the government providing a 25% bonus on contributions at the end of each tax year up to the age of 50.

LISAs can generally held by an individual who:

  • is 18 years old or more;
  • is under 50 years old (individuals between 18 and 40 may open accounts, but investments may be made up to age 50);
  • has not made and will not make any payments into any other Lifetime ISA in the same tax year;
  • has not exceeded the overall subscription limit (see below);
  • has not exceeded the overall Lifetime payment limit of £4,000; and
  • is UK-resident or has earnings from overseas Crown employment (or is married to or in a civil partnership with a person who has such earnings).

The funds in the account, including the government bonus, may be used to buy a first home worth up to £450,000 at any time from 12 months of opening the account and can be withdrawn from age 60 for any other purpose. Savers are also able to access the funds in their account if they become terminally ill.

Unauthorised withdrawals

Under the normal rules, most withdrawals that are made from accounts will be subject to a 25% charge of the amount withdrawn, which is deducted by the plan manager and paid to HMRC. However, to help with the impact of the coronavirus (COVID-19) pandemic, in May 2020, the government announced that the charge for unauthorised withdrawals from a LISA during the period 6 March 2020 to 5 April 2021 inclusive would be reduced from 25% to 20%.

What happens if the investor dies?

On the death of an account holder, the Lifetime ISA funds will form part of the estate, but a spouse or civil partner may inherit the ISA tax advantages and will be able to transfer the funds into his or her own ISA in addition to their own allowance (the 'additional permitted subscription').

When an investor dies, no further payments can be accepted into the account. However, since 6 April 2018, the LISA can remain open as a continuing account of a deceased investor.

The government bonus can be accrued on payments made into the LISA on or before the date the investor died and claimed accordingly. The investor's estate can only receive the government bonus once the Lifetime ISA has been closed.

Any government bonuses claimed on payments made after the date of death of the investor must be withdrawn and repaid, although there will be no withdrawal charge payable if the person managing the account was unaware that the investor had died.

What happens if an investor becomes terminally ill?

When a Lifetime ISA investor is terminally ill and has obtained written evidence from a UK registered medical practitioner that they have less than 12 months left to live, any subsequent withdrawals will be charge-free. A withdrawal in these circumstances does not require a closure of the account. Subject to the wishes of the investor, the account can remain open and further amounts can be paid in.

Evidence from a UK registered medical practitioner proving that an investor has a terminal illness applies to the whole period in which the LISA remains open, even if this is longer than the 12 month period set out in the written evidence provided by the investor.

Addlestone Office

Managing LISAs on death or terminal illness

Andrew has been working in accountancy practices since leaving school at 16 and has over 30 years of experience dealing with all aspects of small and medium size businesses, personal and corporate tax issues.

He has been a partner since 1995 and has a wide and varied general practice background.

Andrew has extensive knowledge of many areas of business, accountancy and tax and is able to draw on his experience and knowledge to give clients comprehensive advice on a wide range of matters.


Managing LISAs on death or terminal illness

Keith joined Turner Hampton in May 2001, as tax partner. He qualified with a medium sized provincial firm in 1994 before moving to the City to join a top six firm where he specialised in multi-national partnership tax.

He has a wealth of experience in dealing with small owner managed businesses through to larger national organisations and those with interests abroad.

Keith, currently oversees the personal tax and corporation tax compliance and planning strategies of taxation for our clients.


Managing LISAs on death or terminal illness

Marc joined the accountancy profession in 2006 and trained with a top 50 firm before qualifying in 2010. Marc joined Turner Hampton in the same year because he was excited about the challenge of taking on a more hands-on role with clients.

Marc’s focus is on helping individuals with their businesses – from sole trades to large corporates – and guiding them through the red tape that often comes with accounting. Marc enjoys helping clients spot opportunities that can contribute to their businesses being successful, and assisting them with the real nitty-gritty, without losing the overview. Marc gets the biggest pleasure from his work when he is able to help clients save money or achieve something they may be striving towards.

Outside of work, Marc enjoys watching and playing all sports, listening to music, going to concerts and eating out.


Managing LISAs on death or terminal illness

Vaughn is an ACCA & AAT qualified accountant, Vaughn joined CSL in 2016 and believes his 17 years of experience has allowed him to gain a vast knowledge in dealing with all aspects of small businesses, personal tax and corporate tax issues.

Vaughn is a strong believer in building good client relationships. He feels that by understanding the specific needs of each client, he is able to offer more sound and efficient tax advice.

Outside of work Vaughn is a keen sportsman. If he isn’t enjoying time with his family, he can often be found walking many of Surrey’s local golf course fairways or attending sporting events.


Managing LISAs on death or terminal illness

Melanie joined CSL Partnership in April 2017 as a senior accountant. She is ACCA qualified with over 10 years experience working within practice. Melanie works with a wide range of clients and provides advice to owner-managed businesses and personal tax clients on accountancy and taxation matters.


Managing LISAs on death or terminal illness

Cindy joined CSL Partnership in 2007. She is an ACA qualified accountant with over 20 years of accountancy experience working within both practice and business.


Managing LISAs on death or terminal illness

Colin has worked in the accountancy profession for over 35 years during which he has gained a great deal of experience working on a diverse range of small and medium sized businesses along with sole trades and partnerships.

His areas of expertise lay within accounting, auditing, personal and business tax matters.

He is passionate about the role which small and medium sized businesses play in today’s market and how the accountancy profession can best serve their needs.


Managing LISAs on death or terminal illness

Carole has been a bookkeeper and payroll clerk for over 25 years and is qualified by experience. She has recently become involved in the process of auto enrolment for pensions. Over the years she has been self-employed but more recently employed in accountancy practices around the area.


Managing LISAs on death or terminal illness

Karen joined the practice in early 2019 as our Administrator/Receptionist and brings 15 years previous experience to the role. She ensures the office runs smoothly and efficiently providing back up and resources to the professional staff allowing them to focus on client matters. Karen is a very cheerful individual and always happy to help. In her spare time Karen enjoys spending time with her family.


Managing LISAs on death or terminal illness

Martin joined CSL Partnership in November 2019 returning to practice after spending the previous 8 years working in Industry. He is an AAT qualified accountant and has spent over 20 years working in the profession.

Martin works on all manner of clients from sole traders to large limited companies. He is an avid user of new software and technology to improve how he and clients work together and will always look to find a way to make life simpler for the client so they can focus on running the business rather than stressing over the accounts.


Managing LISAs on death or terminal illness

Ian joined Turner Hampton in 2016 and has worked in the accountancy profession for over 30 years.


Woking Office

Managing LISAs on death or terminal illness

Emma has worked in accountancy practices for over 20 years and qualified as a Chartered Certified Accountant in 2000. She has gained experience in all aspects of the accounting and auditing functions, developing exposure to a broad range of clients.

Emma advises owner-managed businesses and personal tax clients on accountancy and taxation matters. She has a particular expertise on systems review and implementation.

She has worked for CSL Partnership since it formed in 2001, becoming a director in 2005 and now manages the Woking office.


Managing LISAs on death or terminal illness

Philip has worked in various accountancy practices since the age of 19 and joined CSL Partnership in 1998 where he qualified in 2008.

He works with individuals, sole traders and limited company businesses to assist them with all their accounting and taxation requirements.


Managing LISAs on death or terminal illness

Andy has worked in accountancy since 2010 and joined CSL Partnership in April 2018. He has experience in a wide range of sectors, and has enjoyed working with individuals, sole traders and limited companies of varying sizes and needs. Outside of the office, you’ll find Andy on a hockey pitch or listening to music.


Managing LISAs on death or terminal illness

Lesley joined Turner Hampton in 2003, having previously worked both in accounts departments and in practice. She has been running client payrolls since joining the company and has gained many years of experience in payroll. Lesley now processes all aspects of payroll for both Turner Hampton and CSL Partnership clients.


Managing LISAs on death or terminal illness

Gail joined the firm in May 2018 and has worked in accountancy practices as a bookkeeper and payroll clerk since 2013. Historically, Gail has been self-employed and worked for companies in the financial and customer service sectors.

She is a full member of AAT. When not working, she enjoys hiking, mountain biking and yoga.


Managing LISAs on death or terminal illness

Marrieclaire is a bookkeeper, she processes payroll and maintains the accounting records to prepare VAT Returns and CIS Returns. Marrieclaire is a qualified Chartered Management Accountant with varied industry experience.


Managing LISAs on death or terminal illness

Elaine joined in June 2017. Prior to this she worked in a number of different industries including fast moving consumer goods and mechanical & electrical consultants.

She is a fellow member of AAT having completed the qualification in 1997.


Managing LISAs on death or terminal illness

Natasha joined CSL Partnership in October 2019, having worked in accountancy since 2017. Natasha has experience completing payrolls, bookkeeping, VAT returns & CIS returns. She is currently a trainee accountant, looking to become qualified in the coming years.


Managing LISAs on death or terminal illness

Wendy joined CSL in April 2019 as a Part-Time receptionist and administrator after 25 years working as an office manager in the design world. She is more than happy meeting and greeting clients and working with such a great team of people in the Woking Office. In her spare time Wendy enjoys tennis, yoga and pilates.


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