Child turning 18. ISA allowances for year

Tucosalamanca

Asking here, as struggling to find definitive answers online.

We are currently paying into a JISA and steadily using the £9,000 allowance.

What happens when child turns 18?

Does a new £20k allowance apply, or do the earlier JISA contributions for the year need to be taken into account?

Many thanks in advance

noh

When the child turns 18 the Jisa automatically becomes an ISA in their name.
The allowance for the tax year become £20k total so if £9k has been paid in so far then the remaining allowance is £11k.

Maldecul

According to a letter from Hargreaves Lansdown dated 11-Sep-23:

"You're able to add up to £20,000 into your Stocks and Shares ISA each tax year which ends on 5 April. Money added to your Junior ISA before it became a Stocks and Shares ISA doesn't count towards this £20,000 limit."

Tucosalamanca

Maldecul said:

According to a letter from Hargreaves Lansdown dated 11-Sep-23:

"You're able to add up to £20,000 into your Stocks and Shares ISA each tax year which ends on 5 April. Money added to your Junior ISA before it became a Stocks and Shares ISA doesn't count towards this £20,000 limit."

That would be money added in previous tax years.

In our case (as per opening post) it turned out to be a non issue. So much has changed since April 2022.

Shortly after they turned 18, the money was split between various fixed term accounts, all of which offered a better return than an ISA. Taxation not an issue as they are earning less than £12,570.
Some money has also gone into LISA as that better suits our objectives.

eskbanker

In the tax year of their 18th birthday, the child(/adult) can use both the JISA and ISA annual allowances, i.e. a total of £29K, as explained on an old gov.uk page from when the JISA limits were lower:

Subscription limit for child turning 18 example

A stocks and shares JISA exists from 6 April until the eve of the 18th birthday and can accept subscriptions up to £4,128. The next day it becomes an adult stocks and shares ISA which can accept subscriptions up to the annual ISA limit of £20,000. So in a child’s 18th year, they can (for that one year only) subscribe £24,128 (in 2017/18) to what is effectively the same account.

https://assets.publishing.service.gov.uk/media/5ac4bb7c40f0b60a4e1b0e2e/worked_example_of_subscriptions_between_ages_16_and_18.pdf

linked from:

In addition, from the start of the tax year the child turns 18, they can:

• use their whole JISA subscription limit (even though the JISA will be held for a part-year only)
• subscribe the overall ISA limit to a cash ISA
• from their birthday, invest in a stocks and shares ISA, an innovative finance ISA, or a Lifetime ISA subject to the subscription limits

https://www.gov.uk/guidance/repair-a-junior-isa-and-manage-account-holders-subscriptions

xylophone

Will the parent (s) be gifting the money for the adult ISA?

If so, see

https://forums.moneysavingexpert.com/discussion/comment/80093888/#Comment_80093888 

https://forums.moneysavingexpert.com/discussion/comment/80095991/#Comment_80095991

and

https://www.telegraph.co.uk/money/banking/savings-accounts/isa-loophole-children-chancellor-to-close-how-cash-in-now/

Time is running out to cash in on an Isa loophole that allows wealthy parents to save £29,000 a year for their children tax-free.

Money saved in Isas is free from tax on savings interest, dividend tax and capital gains tax. Currently, 16 and 17-year-olds have two Isa allowances – £9,000 for a Junior Isa and £20,000 for a cash adult Isa. 

This is due to a discrepancy which means you must be over 16 to open a Cash Isa, whereas the Junior Isa runs until age 18, when it converts into an adult Isa. 

But in a policy document published alongside the Autumn Statement, the Government changed the rules so that savers soon will have to be aged 18 or over to open a cash Isa. 

However, the changes do not kick in until April 2024. This means parents with enough spare cash can still save up to £29,000 on behalf of a child before the end of this tax year when the loophole will be closed. 

eskbanker

I haven't seen anything in the forthcoming changes that affects the aggregate allowance for those turning 18?

xylophone

I haven't seen anything in the forthcoming changes that affects the aggregate allowance for those turning 18?

I don't quite follow? I don't think anything in my post said that there were?

I was just pointing up the information on "parental settlements" and also the fact that the "loophole" is going to close.

eskbanker

xylophone said:

I haven't seen anything in the forthcoming changes that affects the aggregate allowance for those turning 18?

I don't quite follow? I don't think anything in my post said that there were?

I was just pointing up the information on "parental settlements" and also the fact that the "loophole" is going to close.

Fair enough, perhaps you weren't intending the implication, but just to be clear, the 'loophole' that's closing is a different one from the subject of this thread, i.e. the change that 16/17 year olds won't be able to open adult ISAs anymore doesn't alter the fact that £29K can be saved in ISAs during the tax year in which the holder turns 18.

Eco_Miser

The change is that 16/17 year olds can at the moment save £29K in ISAs as well, but won't be able to in future. The money doesn't have to come from parents, the child could be earning it.