One of Chancellor George Osborne’s most popular initiatives at the end of last year was his decision to right what many perceived as an ingrained wrong in the tax system and allow widows and widowers to retain the tax benefits of money held in ISAs when inherited from their deceased spouse.

The Autumn Statement move was greeted as a welcome end to what was often referred to as the ISA ‘death tax’. The Exchequer estimated around 150,000 savers and their spouses each year were caught by the rule, which meant that the ISA wrapper was not transferable and was lost upon death.

Previously, future income and capital gains from the money in the ISA would become liable to tax in the normal way – a rule that was felt by many bereaved spouses to be a frustration at best. Now, if an ISA investor or saver dies, their married or civil partner can inherit the tax advantage.

From 6 April, the new rule will operate through a one-off additional ISA allowance for the surviving spouse that will be equivalent to the value of the deceased’s ISA savings. The spouse will still be able to invest their own annual allowance – which will increase from £15,000 to £15,240 from 6 April.

After probate has been granted, the funds will be transferred into a new ISA in the name of the surviving spouse. The change has no impact on the Inheritance Tax that could be payable as ISAs will still form part of the deceased’s estate.

The Treasury calculates that the average ISA fund for over-65s is £29,880, so the cost to the Exchequer in lost Income Tax on dividends (for higher rate and additional rate taxpayers) and Capital Gains Tax on disposals will not be significant – the government says it will be negligible in the first few years, rising to about £10 million by 2019/20.

The saving could, however, be valuable for couples with sizeable ISA funds. Everyone should review their Wills to make the most of this new concession, because if investments in an ISA are left to someone other than a spouse they will lose the tax exemption.

Early signs are that the move has been well received by investors. In a survey of some 2,000 over-50s conducted by Saga in December, more than a quarter said they were more likely to invest in an ISA following the announcement in December.

The favourable tax treatment of ISAs may be subject to changes in legislation in the future. An investment with St. James’s Place will be directly linked to the funds you select and the value can therefore go down as well as up. You may get back less than you invested. An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA.

The writing of a Will involves the referral to a service that is separate and distinct to those offered by St. James's Place. Wills are not regulated by the Finance Conduct Authority or the Prudential