Last week, I introduced the subject of tax-effective savings for children. I spent a little time considering the options available and then focused on the newest option available, the junior Isa (Jisa). I would like to continue that theme this week with a (reasonably) detailed look at the regulations applicable to the Jisa.
As you would expect, a number of the current Isa regulations apply equally to the junior Isa, for example, the general investment rules and qualifying investments for a stocks and shares account.
In some aspects, the junior Isa resembles the child trust fund account, for example, parental contributions are not subject to the parental settlement income tax rules.
Below we examine the Isa rules which, suitably amended, apply specifically to the junior Isa.
The Jisa is available to an eligible child. An eligible child in one aged under 18 (there is no minimum age)
a: who is born on or after January 3, 2011 or before that date but was not eligible for a child trust fund (CTF) account, for example, a child born before September 1, 2002 who was therefore not eligible for a CTF account and
b: who, at the time the Jisa is opened, is
i: resident and ordinarily resident in the UK or
ii: a Crown employee working overseas or the spouse/civil partner of such a person or a dependant of such a person.
It should be noted that it is the child’s residence status at the time of opening the account that counts – future non-UK residence will not prevent further subscriptions being made to the Jisa.
Opening an account
An application may be made by
a: a person who has parental responsibility for an eligible child or
b: an eligible child who is aged 16 or over.
Operation of an account
An account is operated by the registered contact. A registered contact is the person able to give instructions to an account manager in connection with the management of a Jisa. This will be an eligible child who holds an account and who has attained age 16 (unless suffering from a mental disorder) and in any other case the responsible person for that account. (The responsible person is one who either opens the account or assumes responsibility for managing the account (via an application to the account manager) and at that time has parental responsibility for the eligible child.)
When an account is opened for a child aged 16 or over, it is treated as opened, for contract purposes, by an 18-year-old child. This is to enable the child to manage their account from age 16.
Types of account
Each eligible child can only have one stocks and shares and/or one cash account. This means that it will not be possible to hold more than one cash or stocks and shares Jisa at any time although it is possible to switch provider. The eligible child will be the beneficial owner of the account investments.
The transfer of accounts
Transfers can be made from a cash account to a stocks and shares account and vice-versa.
Change of ownership
Any assignment or charge on investments under a Jisa are void and on the bankruptcy of a child (while holding a Jisa) the entitlement to investments under the Jisa does not pass to any person acting on behalf of the child’s creditors.
Any person may subscribe provided total subscriptions in a tax year do not exceed £3,600. From April 6, 2013, the annual subscription limit will be increased in line with the consumer price index.
There is no minimum subscription. Fixing a minimum subscription is down to account providers but it seems some plan to permit an account to be opened for as little as £1.
Any overpayment must be repaid by the account provider. Subject to not exceeding the £3,600 maximum, the subscriptions may be made to:
a: a cash account
b: stock and shares account
c: split in any proportion between a cash account and a stocks and shares account
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