Cash ISA 17 yr old

Skomervole

My daughter is 17 yrs old and has a Junior Cash ISA. In March I tried to open an Adult Cash ISA and was told by her provider that this couldn't be done until she was 18. I therefore added to her JISA and subsequently added more after 6th April. However I have now seen the following on the Gov.uk ISA website "If you were born between 6 April 2006 and 5 April 2008, you can open one cash ISA before you turn 18" I have also seen comment to the effect that ISA providers were given until April 2026 to put into effect the change to the minimum age from 16 to 18 which applied from April 2024. It seems therefore that her JISA provider has already made the change and will not therefore accept an Adult ISA appication for a 17 yr old. Does anyone know of a provider who will open an Adult Cash ISA for a 17 yr old under the transitional arrangement outlined in the Gov.Uk website? 

Skomervole

It looks as though Nottingham Building Soc will do it - but only in branch! Any others?

Skomervole

Even if you can, there appears to be a problem with parents providing a child with money to put into an Adult Cash ISA . "Tell HMRC if, in the tax year, the child gets more than £100 in interest from money given by a parent. The parent will have to pay tax on all the interest if it’s above their own personal savings allowance" and "

The £100 limit doesn’t apply to money:

• given by grandparents, relatives or friends
• in a Junior ISA or Child Trust fund"

refluxer

Yes - interest earned by a 16 or 17-year old in an adult ISA that arises from money given to them by a parent doesn't get round the £100-per parent rule, as you might expect it to.

When it comes to a parent wanting to give a child larger sums without any tax liabilities for the parent on the interest earned by that money, you're limited to the £9k per tax year you can give them via a Junior ISA.


From : https://www.litrg.org.uk/tax-nic/income-tax/working-out-what-taxable/gifts-and-loans

If you are 16 or 17, the parental settlement rules also apply where your parents make a gift to an ordinary (adult) Individual Savings Account (ISA) in your name and your total income from parental gifts is over £100 before tax each year, even though income arising from ISAs is usually tax-free. Note that it is no longer possible for under 18’s to open an adult ISA. You can read about the change to the rules on GOV.UK.

However, if the gift is to a Junior ISA, these gifts do not fall under the parental settlement rules.

Skomervole

Yes - It looks as though the best you can achieve for a 17 yr old is to put £9000 into a JISA and when it matures at the 18th birthday add money upto the max allowable in the tax year (currently £20000 - but possibly less post budget) Why bother with ISAs for a non taxpayer? It seems that interest on savings will count as income for the purposes of repayment of student debt unless held in an ISA. The income threshold for debt repayment is likely to be at minimum wage within the next few years - many in their first jobs may find they are paying 9% on their savings interest.

refluxer

Thanks for the heads up on that. It looks like savings interest only needs to be taken into account once the student earns more than £2k in 'unearned income' ?

At least that's the case for plan 1,2 & 4 student loans according to the 'Unearned income' section part-way down the page linked to below - I'm not sure if the same >£2k threshold would apply to plan 5 loans (the current, standard student loan for university students in England from August 2023 onwards) or if the whole lot would count ?

https://www.litrg.org.uk/tax-nic/student-finance-and-tax-system/student-loan-repayments/self-assessment-student-loan-repayments

Skomervole

I'm afraid I don't know the position under Plan 5 loans - haven't seen anything to suggest that it will be any different to the earlier loan schemes, but information difficult to come by. Interesting to see that once you exceed the £2000 limit the whole amount and not just the excess is counted as unearned income and taken into account in the repayment calculation. At current rates, the problem only arises when the student has approx £40,000+ in savings. However many older parents like myself may well be looking at transferring funds to young adults rather sooner than previously planned following the changes to IHT on pensions.