education continues to grab the headlines and presents a real challenge. The National Union of Students estimates that those who choose higher education will graduate with debts of £ 35,000- £ 40,000 in student loans( source www. university. which. co. uk, 17 Feb 2015).
And the financial challenges keep coming for the younger generation. According to a recent report, the average cost of a deposit on a house for a first-time buyer is now over £ 42,500 and, unsurprisingly, the average age for a first-time buyer is now 31( www. thesundaytimes. co. uk, 14th June 2015)- that isn’ t an appealing prospect for children or their parents! Without a helping hand, your children’ s hopes and dreams may remain just that; but with sensible financial planning you can help make them a reality.
The Junior Individual Savings Account( JISA) is a tax-efficient savings vehicle aimed to provide parents, grandparents, friends and relatives with the opportunity and encouragement to build a capital sum for the benefit of their loved ones.
The JISA is available to all UKresident children under the age of 18 who do not have a Child Trust Fund( CTF). The rules and regulations governing JISAs are based on those for a standard ISA. From 6 April 2015, any CTF can be transferred into a Junior ISA Both stocks and shares and cash JISAs are available and children are able to hold one of each account at a time. The current maximum annual contribution limit( combined across both accounts) is £ 4,080 a year per child. This can be shared between a Stocks & Shares Junior ISA and a Cash Junior ISA; in any proportion. The maximum contribution increases with inflation each year.
JISAs also benefit from the same tax advantages as ISA’ s – taxfree interest on cash deposits, no further liability to income tax on dividends and no capital gains tax. Significantly, the accounts will be owned by the child but the funds will be locked in until the child turns 18. Rather than pay out at that point, JISAs will roll over into standard ISAs, hopefully encouraging the same saving discipline into the future.
The government-set contribution limits are intended to encourage all families to save for their children’ s future, although the relatively low annual limit may still prove beyond the means of many parents, particularly in these austere times. But help is potentially at hand. Whilst a JISA has to be set up by a parent or guardian, the rules allow contributions from any source. It is often grandparents who are in a position to lead the way in saving for children, possibly as part of their own plans to mitigate inheritance tax. And it should also be remembered that other relatives, godparents and family friends can also make a donation towards this valuable allowance.
JISAs, clearly, have a number of valuable tax advantages but they are by no means the only solution for saving on behalf of your children. For larger sums, or to retain a greater level of control, the use of trusts provides greater flexibility whilst still offering the potential to make significant tax savings. However you want to invest, you need to choose a simple, flexible solution that gives you every chance of success in providing that vital helping hand to your children in the future.
To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, please contact Paul Brady on 0121 355 2473 or email paul. brady @ sjpp. co. uk.
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