Money Matters Dec 11

Junior ISA’s

We have 3 grandchildren and would like to gift them each £5,000.  Can we do this by investing in the new Junior ISA.  Is there a tax implication? Answer:
The first point to consider is Inheritance Tax (IHT).  Currently you each have an Annual Gift Allowance of £3,000 and if you did not use this allowance in the previous tax year it can be carried forward to the current tax year.  This means you could both potentially gift £6,000 this tax year without any Inheritance Tax worries.  Between you this is £12,000 and you actually want to gift a total of £15,000.  From an IHT perspective I would suggest you consider gifting each child £4,000 now and a further £1,000 next tax year.  The money could then be invested/saved in to a Junior ISA (JISA) but the maximum for the current tax year is £3,600 per child and so you may want to amend the gifts mentioned above to £3,600 this tax year and £1,400 the next.  The account will need to be opened by the parents or the guardian of the children; you will not be able to do it yourselves.  Also if any of the children have a Child Trust Fund (CTF) they will NOT be able to have a JISA as well but the CTF allowance has increased to £3,600.  Like a normal ISA the money can be allocated to a Cash JISA OR a Stocks and Shares JISA but there is no restriction on the split i.e. it could be all Cash, part Cash and part Stocks & Shares or all Stocks & Shares.  You can only hold one Cash JISA and one Stocks & Shares JISA at any time.  If you or the parents wanted to use the JISA Allowance next year you would have use the existing JISA; it cannot be a different one unless the existing one was transferred to the new provider.  This is different to the normal ISA Rules as you can choose a different provider each year.  It will be possible to transfer a Stocks & Shares JISA to a Cash JISA and back the other way.  Normal ISA’s cannot transfer a Stocks & Shares ISA to a Cash ISA.  The account will be owned by the child and they can access it at 18 and manage it from 16 until then account will be managed by the parent or guardian.  All children, apart from those with a Child Trust Fund will be eligible for the JISA.  If you opt for a Stocks & Shares JISA, the value will of course fluctuate.  As always I would suggest that you get detailed advice from an Independent financial Adviser.

Any reader interested in discussing this topic further can telephone Peter Sharratt on 01344 875000 or email peter.sharratt@kirkrice.co.uk

Answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.