ISA vs JISA

brad_drum

I've saved around £12k for my child. It's currently in a regular ISA (in my name) that matures later this month. I've been considering putting £9k of it into a JISA, but tbh, I don't really understand what the benefit would be. Regular ISAs appear to have better rates and be more flexible, and I'd also end up having to split the money into separate accounts due to the £9k JISA annual limit. Other than the risk of maxing out my own ISA limit, is there any downside to me simply re-investing the £12k into a regular ISA (in my name again) and keeping hold of it on behalf of my child? Is there any tax implications when I eventually transfer the funds over to them?

Thanks in advance.

El_Torro

You can gift money to your children, or anyone really, without any tax implications. There is no gift tax in the UK. 

I think you have outlined the main downside, that keeping it in your name eats up your ISA allowance. If you don't mind this then there's little reason to put the money in a JISA. 

One "problem" with a JISA is that the money legally belongs to the child when they turn 18. At this point they can do what they want with the money, including blowing it all. 

xylophone

You can gift money to your children,

If the interest arising on a parental gift to his/her unmarried minor child (outside a gift into JISA) exceeds £100 per annum, while it belongs to the child, it will be taxed as the parent's.

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4310

brad_drum

@xylophone - isn't that for parents who have separated?

Just to provide a little more detail. I'm a higher rate tax payer and live with the mother of our child (but we aren't married or in a civil partnership). My partner doesn't work. I don't personally use my annual ISA allowance, so my plan is to open a new cash ISA (when the current one matures) and simply dump the whole £12k into the new one. This will grow over the coming years and be transferred to different accounts, but ultimately I'll need to transfer the funds to our child in around 5 years. By that time, I'm hoping we'll have at least £18k saved in an ISA for them.

Would there be any problems or implications with transferring £18k from my ISA over to my child's ISA or savings account?

saajan_12

Currently its your money earmarked for child. 
* You have control if you needed the money in case of an urgent bill or if you want child to put it towards education instead of a car or whatever when they turn 18. 
* Uses your ISA allowance in case you needed it for something else. 
* Whenever you do transfer it to child, there's no gift tax. IF you die within 7 years and IF your assets are over the IHT threshold (currently 325/500k) then you may have some additional inheritance tax to pay vs if you'd transferred it over sooner. However personally that's too many 'if's to worry about for this size. 

If you changed it to a JISA, 
* The money is legally child's to be used in their interest and theirs when they turn 18, even if they want to use it on something you think unwise. 
* Subject to the 9k per year allowance so you could transfer the lot over 2 years, ie be done by April 2026. 
* No gift tax and no IHT assuming you survive 7 years. 

xylophone

No - the rule is aimed at preventing parents (whether married/divorced/single) from using their children's tax allowances to gain a tax advantage for themselves.

Example

https://www.ybs.co.uk/savings/childrens-savings-accounts?apply=all&sort=rateHigh&filters=