From the 1st July 2014, the annual NISA (known as an ISA up to 30th June 2014) contribution limit increases to £15,000. At the same time, the annual contribution limit to a JISA increases to £4,000.This means that up to £19,000 in the tax year 2014/15 can be invested in a NISA/JISA combination as follows:-
i) A 16 or 17 year old can continue to invest in a cash NISA in their own name subject to the contribution limit of £15,000.
ii) By definition, a child who is now aged 16 or 17 who did not qualify for a Child Trust Fund account will be eligible for a JISA. Up to £4,000 can be invested by an eligible child, who is aged 16 or over, in their own name. The investment can be split between cash and stocks and shares in any proportions.
There is a tax trap for the unwary if a parent provides their child with the cash to invest in a NISA. This is because the income tax anti-avoidance rules for gifts from parents to children to enable them to take out a NISA are applied in order to prevent investments for minor unmarried children not in a civil partnership being funded by parents and, in this way, side-stepping the provisions of section 629 ITTOIA 2005. These provisions ensure that if a parent gives a child funds to invest in a NISA, and the investment income arising on all gifts from that parent to that child, including the gift to purchase the NISA, in a tax year exceeds £100 per annum gross, all the investment income will be treated as that of the parent for tax purposes. This is the case even though the income would arise in an otherwise tax-free environment, i.e. in the NISA. The parent should report such income to their tax office.
However, parents may contribute to a JISA without these provisions.
Contact us for further advice on 01793 771093.