DIY Investor Magazine
/
March 2017
13
‘A STEP CLOSER TO A PENSION ISA WHICH WOULD
HARMONISE THE TAX TREATMENT OF PERSONAL
PENSIONS AND ISA WRAPPERS’
JUNIOR ISA
Replacing the Child Trust Fund (CTF) in November 2011,
the
allows up to £4,080 to be saved
tax-free each year for any child under 18; a CTF can
transfer into a JISA.
JISA has Cash and Stocks and Shares options; money
stays in the account until the child reaches 18, when it
becomes a Basic ISA; the child can be the registered
contact from age 16 or can open either their own JISA
or a Basic Cash ISA.
Best for: With tuition fees, student debt and the soaring
cost of accommodation, Junior ISAs are a good way to
give children a financial head start in life.
There are few circumstances in which opening a JISA
would be a poor choice for an under 18; a relatively
long investment horizon may allow a slightly more
risky investment strategy and provides the ideal way
to benefit from Einstein’s ‘eighth wonder of the world’ –
compound interest –
INHERITANCE ISA
An
is for those bereaved since
December 3rd 2014; it is an additional ISA allowance
set at the value as your partner’s ISA at the date of
their death, transferred into your name, with all interest,
income and withdrawals preserved tax-free. Previously,
upon death, the ISA account was closed and the tax-
free status of the investment ended.
E.g. if someone were to pass away leaving an ISA
valued at £50,000, a surviving partner in the current
tax year would have an ISA allowance of £65,240 –
the 2016/17 annual ISA allowance of £15,240 plus an
inherited allowance of £50,000.
This additional permitted subscription (APS) allowance
is not dependant on the surviving spouse inheriting the
money or investments held in the ISA; there are three
years after death to establish an account.
Best for: The Inheritance ISA is designed to address a
very specific situation - anyone whose spouse had an
ISA when he or she died.
HELP TO BUY ISA
The
is a cash account for those saving
for the deposit on a first property purchase; those
saving up to £12,000 can benefit from a 25% ‘bonus’
up to a maximum of £3,000, giving them £15,000 to put
down.
An account can be opened with an initial £1,000 lump
sum and then topped up by £200 per month to which
the government adds £50. The end sum can be used
to buy a home costing up to £450,000 in London or
£250,000 elsewhere; if it is used for something other
than a house deposit, the 25% bonus is withdrawn.
The bonus is only paid upon completion of the property
purchase –
– but it
is a well intentioned attempt to help youngsters onto the
property ladder.
Applicants must be aged sixteen or over, have never
owned a home here or abroad and can’t have saved
more than £1,200 into a Basic ISA in the tax year in
which the Help to Buy ISA is opened.
Best for: This ISA has a very specific purpose with
little downside – if you are not ready to buy a property
or the property is beyond the price threshold, you
can withdraw funds at any time with tax free interest
payments but without the 25% government bonus. It will
be possible to transfer from Help
