ISA for children? 17 February 2005 at 12:26PM edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings 5 replies 1.1K views

fatboyonadiet

Wanted to start an ISA for a child and wanted to know the pro's and con's of doing this, as opposed to just doing it in my name, and the best interest rate.

Thanks in advance.

dunstonh

First problem you have is that you cannot (assuming child is a minor and not aged 30!!)

rchddap1

What's the point in that? As a child they get interest gross on any savings account. Simply look for a child's account with the best savings interest rate.

lipidicman

rchddap1 wrote:

What's the point in that? As a child they get interest gross on any savings account. Simply look for a child's account with the best savings interest rate.

But that's not true is it? They have a personal allowance like anyone else and if the money comes from a parent and earns over £100 interest it is taxed as the parents income.

It would be great if kids could have ISAs as most people go on to become taxpayers and you could have a nice pot tucked away (up to £3000 for 18 years....wow, thats £54,000 earning you nearly £3000 tax free a year!) I really dont see why children cant have ISA's

Unbelievable_2

I agree with lipidicman - it would be a great way of saving for education fees etc.

Paul_Varjak

You have to be 16 to get an ISA.

The £100 rule applies to each parent individually. Unfortunately, if the child earns more than this limit, then the parent making the gift is liable for the tax on ALL the interest, not just that interest over £100!

I think the £100 rule was introduced because parents were illegally evading tax by opening accounts in their children's names but using the money themselves.

I think a possible valid way around this solution is for the parent to make a gift to the child's grandparent in the hope that the grandparent will then make the gift instead. (Gifts made to grandchildren are not subject to the £100 rule).

Of course, this scheme would rely entirely on family trust and may not work if there is specific legislation preventing it.

One final point to note: A child can earn interest of up to £200/year tax free if both parents made the gift.