Investment trusts for children

david78

Most savings schemes today have an option to deal on line. Traditionally they have accepted savings by monthly direct debit or lump sum payments sent by cheque and you can still do this if you want.

I like investment trusts for a number of reasons. The best being

(1) I buy income bearing shares at a discount, so I effectively earn more income.
(2) Management fees are much lower.
(3) I know the fund size won't become too big and unmanageable.
(4) Dealing fees are low or zero.

That said, I have unit trust investments too.

kedj

I have also been looking at child investments. Could anyone clarify the tax situation where a parent puts money into a bare trust for their own child? Is the parent still subject to tax on any income exceeding £100 or is the trust taxed as entirely belonging to the child?

I have looked on hmrc website, but am still not clear:-
http://www.hmrc.gov.uk/trusts/types/minors.htm
http://www.hmrc.gov.uk/trusts/types/bare.htm

The first link mentions the £100 rule on parental trusts, but also says that these trusts will be "interest in possession trusts", "accumulation trusts" or "discretionary trusts". The 2nd link on bare trusts does not specifically mention exceptions for money given by parents.

Speaross

Kedj,

I cant categorically answer your question but as far as I can make out the bare trust puts the capital in the childs name and they then become the sole beneficery at 18. That being the case it would be madness to limit the interest (or at least the tax threshold) to £100 simply because the donator was the parent. Im 'sure' this rule must be to get round the loophole of parents investing 'on behalf of' kids in building societies etc & then running off with all the interest (as well as the capital) but this isnt possible as far as I can see with a bare trust. Then again with this government still in power & the english cricket team having just won a one-day match, Im prepared to think anything is possible.

Incidentally anyone else following this thread & wondering about investing for children & worrying about the pros & cons of Unit trust vs Investment trusts, the Money Observer magazine this month (Oct 09) includes an Investment trust supplement which has certainly eased any worry about whether we are making the right decision in going for an IT rather than a UT or OEIC (as has the distinct lack of any financial advisors on this thread attempting to advise otherwise). Just need to agree on the right one now (IT not IFA).