Fixed rate Cash ISAs - two questions!

threechoirs

@refluxer - thank you again. I've found a bit more information about this here - 

https://theprogenygroup.com/blog/isa-changes-what-to-expect-on-6th-april-2024/#:~:text=From 6th April 2024,entire subscription must be transferred.

- which explains it quite well. The one thing I remain a bit confused about is that there's a lot of press about the current loophole that allows 16/17 year olds to have both adult isas and junior isas (though this loophole will close as of this April) which potentially allows quite a substantial sum to be amassed. But why would anyone do this in the first place if it's all going to be taxed at the parental rate anyway?

The more I look into this the more confused I get! 

threechoirs

ALSO, finally - a 16/17 year old is allowed to withdraw from an adult cash ISA before they are 18, but not from Junior ISAs? This seems to make little sense...

refluxer

threechoirs said:

ALSO, finally - a 16/17 year old is allowed to withdraw from an adult cash ISA before they are 18, but not from Junior ISAs? This seems to make little sense...

Child Trust Funds and Junior ISAs were introduced to allow parents (or anyone) to save for a child's future which is presumably why they don't allow access until the age of 18 - I guess HMRC consider this to be a sufficient-enough restriction to put off parents using a Junior ISA to avoid paying tax on their own savings interest, which is why the £100 per parent rule doesn't apply to Junior ISAs.

You'll often see the fact that a 16 and 17 year-old can currently open an adult ISA described as a loophole (as you mentioned above) which can potentially be abused and may be one of the reasons the government is removing the option, along with the desire to simplify ISA rules in general.

refluxer

threechoirs said:

@refluxer - thank you again. I've found a bit more information about this here - 

https://theprogenygroup.com/blog/isa-changes-what-to-expect-on-6th-april-2024/#:~:text=From 6th April 2024,entire subscription must be transferred.

OK - so the fact that you'll be able to pay new subscriptions into more than one ISA of the same type from 6th April this year might mean that a 16 or 17 year-old's £9K allowance could be shared between a Junior Cash ISA and an adult cash ISA already opened in their name from the next tax year onwards.

threechoirs said:

The one thing I remain a bit confused about is that there's a lot of press about the current loophole that allows 16/17 year olds to have both adult isas and junior isas (though this loophole will close as of this April) which potentially allows quite a substantial sum to be amassed. But why would anyone do this in the first place if it's all going to be taxed at the parental rate anyway?

Presumably any parents intentionally abusing a 16/17 year-old's adult ISA in this way won't be reporting the interest to HMRC, which is one of the reasons why it's often described as a loophole.

I guess this could also be done without realising, as you're not normally required to declare ISA interest if and when you self-assess and many parents with good intentions won't be aware of the tax implications.