On Telegraph today. I’d never come across this.
So if I have a 7 year old i can open a cash ISA and a shares ISA this year and stick in £29k total in ISAs? Is that right?
Chancellor closes £29k Isa loophole – here’s how long you have left to cash in
Parents could maximise tax-free savings before changes to teenage Isa rules kick in
By
Charlotte Gifford,
SENIOR MONEY WRITER
23 November 2023 • 11:35am
Time is running out to cash in on an Isa loophole that allows wealthy parents to save £29,000 a year for their children tax-free.
Money saved in Isas is free from tax on savings interest, dividend tax and capital gains tax. Currently, 16 and 17-year-olds have two Isa allowances – £9,000 for a Junior Isa and £20,000 for a cash adult Isa.
This is due to a discrepancy which means you must be over 16 to open a Cash Isa, whereas the Junior Isa runs until age 18, when it converts into an adult Isa.
But in a policy document published alongside the Autumn Statement, the Government changed the rules so that savers soon will have to be aged 18 or over to open a cash Isa.
However, the changes do not kick in until April 2024. This means parents with enough spare cash can still save up to £29,000 on behalf of a child before the end of this tax year when the loophole will be closed.
Nimesh Shah, of accountancy firm Blick Rothenberg, said: “You’d have to be a pretty rich teenager to make use of it. But for wealthy parents, this can help augment their tax-free allowances. If they had two children, parents could save almost £60,000 extra tax-free.”
Isas have become even more valuable in the era of higher interest rates, which has brought with it the threat of tax.
With the best savings accounts paying more than 5pc in interest, a higher-rate taxpayer would need only £10,001 in savings before they would have to start paying tax on their savings.
Higher-rate taxpayers are limited to earning £500 in interest before tax is charged, while for basic-rate taxpayers the allowance is £1,000. Additional rate taxpayers get no allowance, meaning any interest earner from savings is immediately taxable.