22nd Jun 2016
We like Junior ISA's. There are two types, cash, and stocks and shares, the maximum investment for 2015-16 being £4,080. We like them because the money in the ISA belongs to the child who can take control of the ISA when they are 16 years old and withdraw the money at 18 years old if they wish to do so. If not, the ISA becomes an adult ISA. There is an argument on “Money Savings Expert” which runs along the lines of why allow your potentially irresponsible18 year old access to (all that) money. There are a couple of answers to that. It is exactly the time of life when young adults need money for university fees, a house deposit or a car. It is all very well to say that any child has a personal tax allowance, and unless they benefit from a large trust, there is no way their income will exceed that limit, but unlike interest on money gifted by parents, Junior ISA's do not have any tax issues and more to the point, any gifts reduce the donors estate for IHT, so ideal for grandparents as well. The new rules on taxation of dividends and interest after 6th April 2016 might well change the opportunities but it does not detract for the main benefits as we see them i.e. there is no tax in an ISA, the donor potentially reduces their estate for IHT, at the same time as building a nest egg.