Minimum age for corporate bonds purchase?

Someone under the age of 18 can't enter into a contract to buy a listed financial instrument or sign up to loan money to a government or corporation in a debt issue.

You can buy in bare trust on their behalf (so that the assets belong to them beneficial but you legally). A bare trust is the simplest type of trust with them having the absolute right to the assets once they hit 18 at which point they could demand you transfer into their direct ownership.

Alternatively if you are the parent/guardian you could buy the assets for them inside a Junior ISA, if the child is not already over their contribution limit for the year.

*edit : if you're financially savvy enough to be looking at buying individual corporate and government bonds for your children, you're probably well aware of the parental settlement rules in s629 (the "£100 rule") which treats their income as belonging to their parent for tax purposes if the parent funded the account or settled the trust. Giving your kids a load of cash still gets it out of your estate for inheritance tax purposes (subject to the usual rules) because the assets gifted are no longer yours, but doesn't save your income tax bill if they earn over £100 of income from the trust in a year. You can avoid that by having the trust funded by someone else -e.g. grandparents, generous uncles - or by using a JISA where there's no income tax anyway.

compstuff wrote: »

- With regards to ISAs and the annual allowance. It this calculated on the investment alone or does it include the interest as well as the initial investment?

You can put £4080 of new money in during this tax year. From April 6th it will be a new tax year so you can put up to that year's limit into it as well and be at £8k+, and keep adding new money each year. If it grows to £1,000,000 with interest and dividends and capital growth, nobody cares.

- When looking at Junior ISAs the guidance is kind of vague; stocks and shares can be invested in the JISA but this means (by the way I am reading it) that bonds are not allowable?

You can hold everything that can be held in an adult cash ISA or S&S ISA.

So, that includes qualifying shares listed on a recognised stock exchange (including AIM) whether ordinary shares or preference shares; qualifying investment trusts; open-ended funds such as Oeics, unit trusts, UCITS investing in a whole range of stuff (including bonds); individual gilts, bonds, PIBS, and so on.

Of course, individual ISA managers may not all offer every type of investment under the sun. Not every family wants their kids to be able to have bonds dealt for them so some managers don't add facilities that are unpopular or niche - and instead cater to the mass market with funds or investment trusts.

- JISAs seem quite tax inefficient as interest from a gift over £100 is taxed at the parents rate.... This surely defeats the purpose of an ISA?

No, because the JISA is explicitly a tax exempt vehicle so there is no taxable income coming in to be assigned to the parent. They are designed for money to be invested for the child for the child to access at 18, and intended to let everyone including parents, family and friends contribute.

The parent can't just dump cash in as a vehicle for family savings and take it back a couple of years later having used the child as a tax shelter, because the money can't come back out until age 18 when the JISA converts to an adult ISA in the name of that "new adult". So there was no reason to rewrite the £100 rule to cover JISAs.

Bare Trusts - Again the guidance is pretty vague, can I invest bonds in these?

Yes.