Using my ISA for my child

sweetbutternut

I would like to use my own ISA allowance to save for my child (I don't want to invest in the Child Trust Fund as he can have free access to the money at 18).
I basically want to earmark contributions in my own ISA for my son.
Question is, can I freely use this money to pay for his education or to buy him a car for example without paying tax on my gifts to him?
If I gave him the cash, would he be taxed on it? Would I be taxed on it?
Would greatly appreciate any advice on this. Thanks!

sweetbutternut

Forgot to mention, I am referring to a Stocks and Shares ISA.

Stubod

..you can gift what you like as there is no such thing as gift tax...the only time when the recipient would have to pay tax is if you were to pass on within 7 years, and your inheritance exceeds the tax limit...and this is something like £350k...ie there should not be any problem with you investing the money in your name, and passing it on as and when you want..(subject to the above comments)..at least I think that is the case....but I am sure some other good people will correct me if I am wrong...

jimjames

sweetbutternut wrote: »

I would like to use my own ISA allowance to save for my child (I don't want to invest in the Child Trust Fund as he can have free access to the money at 18).
I basically want to earmark contributions in my own ISA for my son.
Question is, can I freely use this money to pay for his education or to buy him a car for example without paying tax on my gifts to him?
If I gave him the cash, would he be taxed on it? Would I be taxed on it?
Would greatly appreciate any advice on this. Thanks!

No there is no issue with money in your ISA being used for any purpose you want including giving it to your child. The only issue could be if at some point in the future you need to claim any benefits the money will count as yours (because it is) when if it was in a CTF it would be theirs and not count as your asset.

talexuser

I have done the similar thing for a grandchild, given the money to the mother since she does not use the share part of her ISA allowance and has no plans to do so for a few years. We discussed and preferred for the parents to have control of the money, invest it on a 16 year time scale, and then it can contribute to university, first car, flat deposit etc.

xylophone

We discussed and preferred for the parents to have control of the money, invest it on a 16 year time scale, and then it can contribute to university, first car, flat deposit etc.

Except that this now belongs legally and beneficially if there is no specific trust to the mother- if she has a will, she needs to specifically bequeath this investment to the child - be aware too that should she fall on hard times between now and giving it to the child, it will be regarded as her money for purposes of means tested benefits.

talexuser

Yes, we went through the pros and cons of each route and decided that their overriding opinion was to not necessarily have a large sum of money fall in to your lap at 16 or 18 without having to do anything for it from a viewpoint of character building. The means testing scenario was way down the priority list, both parents have good professional jobs with transferrable skills and their "mortgage" is through us, rather than any bank.

Biggles

Better, for a grandchild, to use a bare trust. An ISA isn't necessary, as taxation is hardly likely to be an issue at any point (unless you are investing very large sums of money) and this way it belongs to the child from Day 1, though can't be accessed till age 18.

talexuser

I find it amazing that an original post where the criteria has clearly been decided that the child should not have access to the money, you get recommendations that allow the child to have access to the money.

Speaking for my own case an ISA is certainly necessary since CGT could well be an issue on the eventual amount.