ISA allowance in the year Junior ISA converts to Adult ISA

incus432

I'm hoping someone can point me to a definitive answer on this question.

I contributed the maximum £9000 to my son's Junior ISA in the tax year he turned 18 (2020-1) , In that same tax year I contributed 14k more to his now adiult ISA, and 4k to a LISA with a different provider.

I consulted an IFA who insists this was an oversubscription, and that the total ISA limit is £20,000 over all forms of ISA, and therefore we need to put this right with HMRC. However neither the JISA/ISA provider not HMRC have raised any queries or alerts in the 5 years since.

I also asked Fidelity and they stated:
"When a Junior ISA (JISA) matures, full control of the account transfers to the child, who becomes the legal adult account holder. Any contributions made into the JISA during the tax year of maturity do not count towards their adult ISA allowance. This means that even if the full £9,000 JISA contribution has already been made before maturity, the now-adult account holder can still use their full £20,000 adult ISA allowance within the same tax year."

This sounds clear so is the IFA just wrong? Does anyone have a link to HMRC guidance?

eskbanker

Therefore, in the tax year in which the child turns 16 they can subscribe up to the JISA limit, and from their birthday they can, in addition, subscribe up to the overall ISA limit to a cash ISA.

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

The last three lines of the quote are meant to be bullet points but lose the formatting in the new editor.

incus432

These are S&S JISA and ISA, not cash. It's a useful page but I find the wording unclear and ambiguous.

EDITED - found rthe worked example.

worked example of subscriptions between ages 16 and 18 (PDF, 180 KB, 1 page)

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.

-=

Out of date limits in this, but it does establish the principle that the JISA and ISA limits are addititive `

masonic

See "Subscriptions between ages 16 and age 18": https://www.gov.uk/guidance/repair-a-junior-isa-and-manage-account-holders-subscriptions

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81857115#Comment_81857115

The page I (and masonic) linked is actually dated 2018, whereas the rules were tweaked in 2024 - IIRC prior to that, 16/17s could open cash ISAs but not other types, whereas this was harmonised to 18 for all types from the start of the 2024/25 tax year, so the cash distinction no longer applies. This isn't reflected in the guidance document but should be, although we're perhaps still in some sort of transition period.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81857201#Comment_81857201

I am glad you brought that up. I was sure the rules changed to remove that loophole and confused as to how I found them in that state without using the "wayback machine" (much meddling there obviously led to me not seeing your intervening post). The good news is the issue relates to 2020/21 - prior to the change.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81857203#Comment_81857203

Yes, I started off looking for old pages on the Wayback Machine but it wasn't working, so am relying on my memory (always dangerous!) and some unauthoritative sites!

incus432

Thanks both - it seems these are murky waters. Indeed my IFA is still insisting that the ISA helpline has confirmed to him that 'all subscriptions made before and after conversion are treated as subscriptions for that individual in that tax year. There remains only one overall ISA allowance.' Perhaps this is now and that was then. But that webpage is still there, extant. Have we missed any more recent pages?

I am sure I would not have made those contributions had I not believed we were within the allowance, and seen advice like that worked example. I shall be quoting it back at them if they now try to argue it was an oversubscription.

masonic

Worth capturing a pdf of that page for future reference, but I would not be pro-actively approaching HMRC who will almost certainly not bother you. Your IFA should not be pushing the issue either, and perhaps needs to review the HMRC page and worked example. There was a section of the MSE JISA guide that explicitly pointed out the loophole, but I gave up trying to use the wayback machine to find that.

incus432

The IFA has been adamant we needed to regularise this before HMRC catch up. I have now sent him the page and example.

Unfortunately son sent letter to HMRC the other day. I guess we could write again saying 'ignore that, it's sorted' (!)

masonic

I would suggest that the only way to "regularise" this particular issue is through a letter of termination to the IFA.

But in all seriousness, I think this is worthy of complaint, because as a direct result of the IFAs factually incorrect and potentially negligent advice, your son has pursued a unnecessary course of action at the cost of his time and resources, which could lead to the error being compounded if there is any misunderstanding by HMRC owing to the misinformation. I would accept a sum not less than £150 (or equivalent credit towards fees if you opt to keep the IFA).