Help to Buy ISA Parent Funding

60camraman60

I have two daughters 19 and 16. They both have savings of around £3000 in bonds that are due to mature and I think they would be best putting the money into a HelptoBuy ISA. I realise they can’t do this in one go. So I suggest they open an account with the best Instant Access Interest that I can find. Open a HTB ISA with £1200 and then drip feed the rest from the Instant Access at £200 per month until it runs out. Now comes the major part of the question. After their money has run out I would like to fund the HTB ISA. From what I can make out from various sites is that because they are my daughters I don’t have a problem “gifting” them money but I can’t drip feed from a savings account to fund the HTBISA it has to be from my wages and I don’t earn enough a month to do that.(HTB ISA's seem to want monthly funding not lump sums) BUT is there anything to stop me funding my grocery bill from my savings account so I have excess money from my wages to fund my girls ISA? Or am I trying to find problems that don’t exist. I don't want to leave them with a Inheritance tax bill when I go.

masonic

It doesn't matter how you do it. The implications will be the same. How you can get the money to them will depend on what options you have for transferring money out of your savings account. You might need to do it via your current account.

60camraman60

Thanks masonic. I can probably get round that by closing one of the low interest savings accounts and putting it into my 1-2-3 account, even at the new £1.5% rate it will be better. But if I am to fund 2 kids at £200 a month (total £4800) how does that fit with the £3000 annual allowance or is that something different.

CLAPTON

60camraman60 wrote: »

Thanks masonic. I can probably get round that by closing one of the low interest savings accounts and putting it into my 1-2-3 account, even at the new £1.5% rate it will be better. But if I am to fund 2 kids at £200 a month (total £4800) how does that fit with the £3000 annual allowance or is that something different.

the 3000 you mention is a IHT limit; so unless you expect to die within 7 years and have a estate in excess of the IHT threshold, I won't be concerned about it.

colsten

60camraman60 wrote: »

I can’t drip feed from a savings account to fund the HTBISA it has to be from my wages

There is no rule that says money for ISAs has to come from wages.

60camraman60

http://www.money.co.uk/guides/how-do-i-gift-money-without-being-taxed.htm
says I can do regular gifting as long as it doesn't come from savings. The problem here is thing I am mixing the general idea of giving money to the kids with the IHT rules.

masonic

60camraman60 wrote: »

http://www.money.co.uk/guides/how-do-i-gift-money-without-being-taxed.htm
says I can do regular gifting as long as it doesn't come from savings. The problem here is thing I am mixing the general idea of giving money to the kids with the IHT rules.

I think they would have a hard time arguing that the gifts were a reasonable provision for their care or maintenance if they saved the money in a HTB ISA, so I don't see how the dependent relative relief would apply.

Is there any chance at all you might survive 7 years after making the gifts?

60camraman60

Sorry if I am sounding a bit confused here but can I try and clarify something as I think I may be getting two things mixed up here.
I want to help out the two kids by giving them enough money so they can claim as much as they can through the HTB ISA. but obviously keep within the rules for gifting. maybe it will be easier if I take the HTBISA out of the equation.
1. I can give each child as much as I want from wherever I want (savings or income) and as long as I live more than 7 years they will not be chased for inheritance tax when I go.
2. I can give each child £1500 a year (total £3000) as a gift and even if I live for less than 7 years they will not be chased.
Sorry if I am sounding a bit thick but maths was never my strong point. I think I am pretty good at budgeting and saving money but what to do with the money that I have saved baffles me.

masonic

Yes, and for both (1) and (2) the gifts can come from income or savings. It's worth noting if you are part of a couple, both of you have a £3,000 per year of exempted gifts, so between you, you could cover all of the money you plan to give to the kids. The other thing to note is that any IHT bill will come out of your estate if you die, so your children will not be chased even if there is something to be paid.

60camraman60

Thanks Masonic that makes things clear. I think "chased" was the wrong term to use what I really meant is that I want to use my allowances to the max to reduce the amount of money left in my estate so it falls below the IHT threshold or at least as close as I can.

One other question. On a comment from a part of MSE main site:

A new tax-free 'main residence' band will be introduced from 2017, but it is only valid on a main residence and where the recipient of a home is a direct descendant (classed as children, step-children and grandchildren). It is being phased in gradually, starting at £100,000 from April 2017, rising by £25,000 each year till it reaches £175,000 in 2020.
So in 2017 the maximum that can be passed on tax-free is £850,000 for married couples or those in a civil partnership, £425,000 for others. For singles, this is made up of the existing £325,000, plus the extra £100,000. For couples, when the first one dies their allowance is passed to the survivor, so that £425,000 is doubled to £850,000.
I assume that it is a case of when one of a couple dies you are still classed in this respect as a couple so in future I (or my wife) would be able to pass on the £850000 and not just £425,000 as a now single person. This probably sounds crazy as the only way this wont work is if you both died together.