Little bit of clarification on ISA's pls

villafan10

Ok may be a completely nooby question. I'm confused as to what constitutes tax avoidance and what constitutes tax evasion. Obviously I don't want to be doing the second but I heard avoidance was legal??

My main question is next year, I should be able to fill more than one ISA allocation (which I'm sure most will) and I know my parents wont be using theirs. Now on the ISA page on here, Martin Lewis' calculator says and I quote

"As you’ll be saving more than £3,600 per year, we are assuming other family members will be using their ISA allowances to help you achieve this!"


Does this therefore mean that using up my parents ISA allocation is avoidance and completely legal (if somewhat immoral) and not, in fact, tax avoidance? Many thanks

dunstonh

I'm confused as to what constitutes tax avoidance and what constitutes tax evasion.

Avoidance is forward planning within rules and laws and taking advantage of allowances. Evasion is breaking rules and laws.

Does this therefore mean that using up my parents ISA allocation is avoidance and completely legal (if somewhat immoral) and not, in fact, tax avoidance? Many thanks

You can use your parents money as legally you are gifting them the money for them to do as they wish. You wont be able to access their money and if they die, it would form part of their estate and may not come to you and may be subject to 40% IHT. So, it ceases to be your money.

villafan10

Ok, I heard something about there being a limit on how much you could "gift" people though. Presumably when I wanted it back a few years down the line, they'd withdraw it and "gift" it me back?

Many thanks for your answers, it helps greatly. Maybe I'm just too honest, just gifting my parents the money doesn't seem right if it's my intention to take it back at a later date

dunstonh

I heard something about there being a limit on how much you could "gift" people though.

There is no limit legally to how much you gift. The only times gifts may be an issue is if you are in receipt of benefits or will be soon, for inheritance tax purposes or you are money laundering.

Presumably when I wanted it back a few years down the line, they'd withdraw it and "gift" it me back?

Yes. However remember that your parents IHT and possible benefits could be affected. Benefits would include pension credits and local authority care means test (just in case they are of that age where it could be an issue).

greenface

Just a small question on a similar note !
Are ISAs that are held by somebody that need to go into care or entitled to benefits means tested.?
Thanks in advance

Milarky

greenface wrote: »

Just a small question on a similar note !
Are ISAs that are held by somebody that need to go into care or entitled to benefits means tested.?

As far as I know, yes. ISAs are not privileged in any way over other savings by means-testing (including 'Pension Credit'). Confusingly ISAs are privileged by 'Working Tax Credit' and 'Child Tax Credit' - making the effective rate of interest on a 5% ISA, say, something ridiculous like '12%' compared to non-privileged gross rates