Business

Isas to be passed on tax-free

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Savers will be able to pass on their Individual Savings Accounts (Isas) to their spouses tax-free when they die, the chancellor has announced.

Previously a spouse or civil partner inheriting an Isa would have been liable for tax on the savings.

But from 6th April 2015, they will be able to add their late spouse's Isa to their own, without a tax charge.

The change will affect 150,000 married partners who die each year.

"Pass on your Isa tax free. Pass on your pension tax free. We are delivering fairness for savers," George Osborne told MPs.

The annual allowance for Isas will increase to £15,240 in April. Savers who take out an Isa pay no tax on capital appreciation or income.

Pensioner Bonds

The chancellor also said he would announce the rate of return for the new Pensioner Bonds next week.

The Bonds will be issued in January, and are expected to be hugely popular.

They will be open to all 11 million people in the UK over the age of 65.

There will be a one-year bond, which is expected to pay around 2.8% in interest, and a three-year bond, which is expected to pay around 4%.

Investors will be able to save a maximum of £10,000 in each bond - in other words £20,000 in total.

The Treasury has already said that a total of £10bn of the bonds will be issued, suggesting that the bonds could sell out very quickly.

Annuities

Thousands of retirees who have pension annuities will be able to pass on the benefits free of tax, Mr Osborne also announced.

So beneficiaries of those who die under the age of 75 will be able to receive the income from such policies without paying tax.

Previously they would have been liable for a 55% "death tax" on annuities.

The change brings annuities into line with the new tax freedoms on accumulated pension pots, due to take affect in April 2015.