17 year old in ISA limbo

17ISA

Hello MSE, my son opened a cash ISA in 23/24 tax year. He was aged 16 years old at time of opening. He can add more money to the same ISA in 24/25 tax year. However as his birthday was close to the end of tax year the ISA he opened was done in a rush and the savings rate is awful (sub 2%)! He wants to move last years cash ISA in full and add additional funds for the 24/25 tax year. However, he cant find any provider that will accept the transfer and additional funds as he is 16. The transitional arrangements are optional for ISA managers and not one seems to have adopted them for transfers of ISAs and new funds for 16-17 year olds. 

Q1 are there any ISA managers that are accepting transfers of cash ISA and additional years funds for anyone under 18?

Q2 does this mean he is stuck with low returns until he turns 18?

Any help greatly appreciated - its just seems 16-17 year olds have been forgotten about in the cash ISA changes due to making the transitional arrangements optional for ISA managers.

xylophone

What happened to his Child Trust Fund?

17ISA

still active in a JISA

refluxer

I don't think the problem is the transfer itself - the problem is that he presumably now can't open a new adult cash ISA to transfer the funds into, due to the change in minimum age for opening one going from 16 to 18.

Did you know that he can potentially earn £18,570 in combined income and savings interest without paying tax ? Or was an ISA necessary to avoid paying tax on the savings interest due to most of the money coming from yourselves (the £100 rule for parents) and having maxed out his JISA allowance each year ?

17ISA

refluxer said:

I don't think the problem is the transfer itself - the problem is that he presumably now can't open a new adult cash ISA to transfer the funds into, due to the change in minimum age for opening one going from 16 to 18.

Did you know that he can potentially earn £18,570 in combined income and savings interest without paying tax ? Or was an ISA necessary to avoid paying tax on the savings interest due to most of the money coming from yourselves (the £100 rule for parents) and having maxed out his JISA allowance each year ?

Exactly the point - not one ISA manager ( that I can find) has adopted the transitional arrangements so if you are 16 or 17 you are stuck with the cash ISA that was opened in 23/24 tax year. All I am looking for is the name of a provider whom has adopted the TA's. Any help much appreciated

refluxer

Apologies - I didn't realise that the transitional arrangements actually allowed the prospect of a 16/17year-old to continue to be able to open an adult ISA (either as a new account or for transfer purposes from an existing ISA) for the next few years, should an ISA provider choose to offer this.

I think one obstacle you'll come across is that the majority of ISA providers (particularly those at the top of the best-buy tables) already had a minimum age of 18 for their adult ISAs in which case they'll obviously still be out of the question, regardless of the transitional arrangements.

If it helps - when I looked for my daughter last year, it tended to be the traditional banks and building societies who offered adult cash ISAs to 16/17 year-olds at the time (eg, Principality, Yorkshire BS, Santander, Nationwide etc) so you could potentially contact them but, as they all seem to have changed their minimum age to 18 now, that probably indicates that they're not adopting the transitional arrangements, as you're finding.

If your son does find himself stuck with a <2% cash ISA with no transfer prospects, then it's likely to be more beneficial to withdraw the money and put it into a normal savings account paying ~5%, even if there were tax implications for the parents. 

xylophone

Presumably his JISA is fully funded for the current tax year?

Where is the low rate ISA currently held?

17ISA

xylophone said:

Presumably his JISA is fully funded for the current tax year?

Where is the low rate ISA currently held?

yes JISA full and cash ISA Barclays 

xylophone

I assume Barclays have confirmed that they would not permit a transfer in to their flexible 1 year/18th month cash ISA.



With regard to the £100 rule, it did (and does) apply to gifts from parents into the ISA accounts of their 16/17 year old minor unmarried children.

See https://www.litrg.org.uk/tax-nic/income-tax/working-out-what-taxable/gifts-and-loans#:~:text=If you are 16 or,ISAs is usually tax-free.

If you are 16 or 17, the parental settlement rules also apply where your parents make a gift to an ordinary (adult) Individual Savings Account (ISA) in your name and your total income from parental gifts is over £100 before tax each year, even though income arising from ISAs is usually tax-free.

https://forums.moneysavingexpert.com/discussion/6496704/long-term-savings-17-year-old

Kim_13

I'd consider withdrawing to a minimum balance (in case anyone does opt into the transitional arrangements before he turns 18, at which point he could resume funding it as he would still have an existing product.) The proceeds could be put into Premium Bonds for the time being, which are also tax free. 

refluxer

xylophone said:

With regard to the £100 rule, it did (and does) apply to gifts from parents into the ISA accounts of their 16/17 year old minor unmarried children.

That's a very good point and something that many parents don't realise, I'd imagine, as a potential tax liability on interest within an ISA is a bit counter-intuitive. I'd forgotten about that when I replied above.