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Individual Savings Accounts (ISAs)
ISAs provide a savings vehicle for parents and are one of few tax-breaks available to taxpayers. Since most children are unlikely to be taxpayers are not allowed to open their own ISA account till they reach the age of 16, these accounts are a convenient way for parents to invest on behalf of their children while getting tax benefits.
ISAs are of three types:
You can invest up to £7,000 – fully in stocks and shares or divided between equity and shares with a maximum of £3,000 in cash.
These provide you with the opportunity of investing in the stock market with tax free returns. Each parent can invest up to £4,000 per tax year on behalf of their child, but the investment has to come from their own ISA allowances.
With these you can tax exempt interest from an account that allows instant access. Each parent can invest up to £3,000 in a mini cash ISA on behalf of their child, but the investment has to come from their own ISA allowances.
In a single tax year you can invest a maximum of £7,000 in ISA. This can be:
- A single Maxi ISA (100% stocks and shares or split between shares and equity)
- A Mini Equity ISA with an investment of up to £4,000 and/or a Mini Cash ISA with an investment of up to £3,000.
Since the limit is £7,000, it is not possible to invest in both a Maxi and a Mini ISA in the same year. You are also not permitted to invest in two Mini ISAs of the same type (cash or equity). |
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