Investing for a 16 year old

ElmoR

Hi everyone

I'm a visitor from another MSE forumite village and this is my first venture to a new topic, so please excuse my questions if they are basic.

The query is about an investment (old foreign and colonial IT) I currently have (inefficiently) in my name and not as an ISA which I know is dumb but I'm a novice and feeling around in the dark. Its value is just over 10K. I have been  dripping £50 a month in for years and just forgot about it. I'm slightly anxious about tax implications but this is pretty much all the savings I have other than some small cash ISAs. Most of my money has gone to overpaying the mortgage and pension.

My question is...can I transfer this to my 16 year old daughter and make it into a junior stocks and shares ISA for her without penalties or breaking the law? She already has a JISA cash account maxed out for this year (which includes her CTF).

Any advice or feedback would be very much appreciated. Thank you kind people!

ElmoR x

colsten

A "transfer" to your daughter would involve that you sell your existing IT, and then use the proceeds to purchase new Funds in a JISA in your daughter's name. You / she will be limited by the total annual JISA limits, i.e. if she's maxed the 2019-20 limit, the earliest you can do it is April 6 2020, and only up to the total 2020-21 JISA limit. Thus is would take at least 2 years, probably 3, to shift £10k (she might be eligible for an adult ISA by then).

The other option you might have is a "bed and ISA" in your own name. Similar applies about total ISA limits as for your daughter, albeit your annual limit is £20k. The difference is that the sell and re-buy process is done by the ISA platform provider, though not all of them do offer "bed and ISA", and your existing investment may or may not be eligible for holding in ISAs.

If you kept the investment where it is: Unless you have other Capital Gains, you wouldn't need to worry about Capital Gains on a total investment of £10k. The annual Capital Gains allowance is higher than your total investment. You might still want to shift money to your daughter, however, for IHT reasons.

masonic

Selling the existing IT and having your daughter reinvest will incur stamp duty. Whereas an investment transferred to her as a gift would be exempt from stamp duty. However, transferring to an ISA would require that the investment was sold and repurchased.

As the amount is relatively low, it might be worth exploring whether the IT could be transferred to a child general investment account (these are usually set up as a bare trust). Your daughter could then bed and ISA the whole lot when she turns 18 if she wishes. She might also consider switching to a more diversified multi-asset fund at that time.

Or you could just hold onto it until she gets her adult ISA allowance.

ElmoR

Thank you colsten and masonic. This reminded me that when I did first set it up that I thought I was doing so in trust somehow. All correspondence has my daughters initials in there, so maybe I succeeded in that?! For now, I think I will leave it as it is and wait until she is 18 to revisit this.