Child Taxation: 9. Children Adult ISA
Published / Last Updated on 09/08/2021
Earmark ISA, Designated ISA:
As a normal ISA cannot usually be in a child’s name but a parent/grandparent can “earmark” the funds held in their own ISA for a child or grandchild e.g. by simply adding the child’s initials or name to the account e.g. in the ‘pet name’ section if there is one or leave it to them in a Will.
The ISA remains in the name of the parent/grandparent and it is the parent/grandparent’s ISA allowance that is used up. Advantages of this are that the funds grow tax free and you keep control even after age 18, just in case the child is not quite ready or mature enough to look after funds. The disadvantage being that when funds are gifted to the child, the ISA tax free wrapper is lost and it is also treated as gift for inheritance tax purposes.
16-17 Years -Two ISA Allowances:
In addition to children having a Junior ISA allowance (cash or stocks and shares ISAs), they can also at age 16 open an Adult ISA with the full adult ISA allowance of £20,000. This means that at age 16 and 17, a further £20,000 pa can be invested in ISAs for the child in the same tax year.
This means that 16 and 17 year olds have full ISA allowances of £29,000 pa (Junior ISA £9,000 and Adult ISA £20,000). There is one condition though and that is a 16-17 year old can only invest in a Cash ISA for the adult ISA element and then later i.e. at age 18 convert this/transfer to a Stock ISA if they so wish.
