ISA full. Can I put my money in my dad's ISA?

Mrs._Fingerbottom

Hello,

I've filled my ISA for this year. My dad doesn't have an ISA. He doesn't mind opening one and letting me put my money in it.

Should I do this? Will I get smack on the bum? Do a lot of people use family to take advantage of ISAs?

-Mrs. F x

jem16

Mrs._Fingerbottom wrote: »

Hello,

I've filled my ISA for this year. My dad doesn't have an ISA. He doesn't mind opening one and letting me put my money in it.

Once you do that the money is no longer yours but is your dad's money.

Should I do this? Will I get smack on the bum? Do a lot of people use family to take advantage of ISAs?

-Mrs. F x

I'm sure many do but it is technically tax evasion if that's what you want to know. Husband and wife it's acceptable but not further afield.

dzug1

The ISA provider will refuse to accept the money from you - so no you can't do it

What you can do is give (repeat give, not lend or anything else) your father the money and he can open an ISA. It's then his ISA, not yours, to do what he wants with without recourse to you.

I am sure a lot of people do it - fine until there's a family row.

Mrs._Fingerbottom

Yeah, I thought it would probably be tax evasion. :whistle:

I looked at the gifting rules. The ISA limit is £5640 but the tax-free gift limit per year is £3000. Presumably, Old Man Fingerbottom would have to pay tax on the £2640 excess?

I'm beginning to think this isn't worth it. :think:

dzug1

Mrs._Fingerbottom wrote: »

Yeah, I thought it would probably be tax evasion. :whistle:

I looked at the gifting rules. The ISA limit is £5640 but the tax-free gift limit per year is £3000. Presumably, Old Man Fingerbottom would have to pay tax on the £2640 excess?

I'm beginning to think this isn't worth it. :think:

No he would not have to pay tax. There is no gift tax in the UK.

Where tax comes in is the gift is part of your estate for IHT purposes. So if you land up worth more than £325K (I think without looking it up) AND die within 7 years there will be IHT to pay, not on the gift itself, but on the excess of your estate over the limit.

There is in any case a one off exemption that you can give 2 years' allowance, £6K, the first time you make such a gift.

Starbrite

Wouldn't it be easier to open a stock and shares ISA? Rather than go down the road of tax evasion?

MoneySaverLog

Starbrite wrote: »

Wouldn't it be easier to open a stock and shares ISA? Rather than go down the road of tax evasion?

Probably the OP does not want to risk his original capital and would prefer the security of cash savings.

It's time they scrapped the half limit on cash ISAs, one should be able to invest the full £11,280 in whatever they want, if that's cash then so be it.

Gordon_the_Moron

Have you considered one or more regular savers on top of your ISA?

Putting the money in someone else's name is a risky business, firstly it is tax evasion, you sign a declaration on opening an ISA that the money belongs to you and secondly if there is a family bust up the money is in his name!

Regular savers can often beat ISAs even after tax!
See: http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

kidmugsy

People on here boast from time to time that they get a higher interest rate on an ISA than they pay on their mortgage. So effectively they are borrowing and putting part of the loan into an ISA. So why can't you borrow from a child and bung the money into an ISA? Of course, the interest would belong to the borrower not the lender.

thenudeone

dzug1 wrote: »

What you can do is give (repeat give, not lend or anything else) your father the money and he can open an ISA.

There is absolutely nothing wrong with lending or giving someone money, which they may decide to put in an ISA in their own name. But the interest or income will be their income, not yours. The money in the ISA is also theirs and would be available to creditors if they became bankrupt or died with debts outstanding.
If they wish to give you a regular gift which just happens to be the same amount as the interest as they receive in interest, that is also perfectly fine.

If they decided to put all on a horse race instead of an ISA, and lost the lot, you couldn't stop them.

grey_gym_sock

thenudeone wrote: »

There is absolutely nothing wrong with lending or giving someone money, which they may decide to put in an ISA in their own name. But the interest or income will be their income, not yours. The money in the ISA is also theirs and would be available to creditors if they became bankrupt or died with debts outstanding.
If they wish to give you a regular gift which just happens to be the same amount as the interest as they receive in interest, that is also perfectly fine.

it's perfectly fine to do all that, but HMRC might take the view that, under the circumstances, it wasn't a case of A making a gift to B, and subsequently B making a slightly larger gift to A, but of A making a loan to B, and B repaying it with interest. that would still be legitimate, but A should then be declaring the interest received as taxable income.