MSE News: Junior Isa plans unveiled

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
25 replies 3.8K views
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  • gadgetmindgadgetmind Forumite
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    I've seen a lot of "what's the point" articles and postings that seem to think that children can earn interest up to their personal allowance and not pay any tax. Wrong! If a child earns more than £100 pa in interest from money given to them by a parent, then the interest is treated as the parent's income. This means it needs to go on their tax return and get taxed at the top marginal rate.

    A child ISA avoids this and is therefore a good thing.
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  • ultrawombleultrawomble Forumite
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    gadgetmind wrote: »
    A child ISA avoids this and is therefore a good thing.

    Absolutely right. The problem we have now is the CTFs which are tax-free until 18 but after that the money becomes taxable, whereas a JISA can be transferred to an adult ISA.
  • cloud_dogcloud_dog Forumite
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    gadgetmind wrote: »
    Wrong! If a child earns more than £100 pa in interest from money given to them by a parent, then the interest is treated as the parent's income. This means it needs to go on their tax return and get taxed at the top marginal rate.
    But there are always grandparents and aunts and uncles, etc, etc which the rule doesn't apply to.
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  • gaulygauly Forumite
    284 Posts
    Absolutely right. The problem we have now is the CTFs which are tax-free until 18 but after that the money becomes taxable, whereas a JISA can be transferred to an adult ISA.

    Actually I wrote this earlier in the thread and I've been told since that the government altered the rules in 2006 so that CTFs can be transfered to an adult ISA when the child turns 18. This was after I opened my child's CTF so I didn't know about this change. So, not so bad as I first thought - sorry for the mis-information!
  • gadgetmind wrote: »
    If a child earns more than £100 pa in interest from money given to them by a parent, then the interest is treated as the parent's income.

    :eek:I never realised this!!:eek:

    If we had a child of 10 and we have saved £10 a month from birth for them. For five years this £10 was invested in a works share save scheme [maturing 5-6 yrs ago], dividends and a compulsory purchase of shares ensued resulting in a 2-3K payout, put straight into child's account. The child recieved 4K from a disbanded trust fund from a grandparent. Plus money gifts when born and spare birthday and Christmas money also invested in their account now worth around 10K.

    Now the interest on the savings exceeds £100 pa. Some of this money was invested in fixed rate cash ISA'S of 1K and 2K in each parents name which matures in Dec this year.

    Recap about 4K grandparents trust [given 2yrs ago]
    about 120X10 1.2K from parents in 10yrs
    about 2-3K from share save scheme [given 5-6 years ago]

    The rest of the money is made up from gifts and interest earned over the 10 years, which is around £200-£400 pounds a year.

    If the ISA money is transferred back into child's name about 3.4 k with interest and the child will earn about £40 interest on this portion alone in the remainder of the financial year. Plus the interest earned on all other monies and the 1.2K saved each year.

    Is all the excess interest above £100 classed as the parents income or a portion? This is very complicated!!

    What about money given in a similar way to an older child who is now over 16 so have their own ISA now, but also money locked in fixed rate bonds they receive £720 pa from parents will all the interest be classed as 'their' money or their parents.

    Does anyone know if JISA'S will they be 'locked' into one account/provider or will they be allowed be transferred to the best rate account providers?
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