With Halloween and Bonfire night over, Christmas is just around the corner. Adverts for the latest toys and must-have gadgets seem to be everywhere. But have you thought of making a gift to your children or grandchildren that has longer-term value?
Instead of something that is soon forgotten or outgrown, why not consider an investment for your child’s later life? The choices include:
- Junior ISAs (JISAs), the maximum overall investment you can make in the current tax year is £4,368 for each child. JISAs make great gifts because the funds are free of UK tax on investment income and capital gains; what’s more they are outside the anti-avoidance rules on parental gifts to minor children.
- A personal pension grows free of capital gains tax, there’s no income tax until benefits are drawn, and contributions qualify for income tax relief – even for a non-taxpaying child. The maximum net investment/gift in a tax year is £2,880, which tax relief boosts by 20% to £3,600.
- Investment funds can be gifted to children, typically by creating a bare trust, although other routes are possible. There are no limits on the amount you can gift, but there are potential income tax and inheritance tax consequences that need to be kept under review, particularly for larger investments.
- NS&I Premium Bonds, which have become easier to buy for children following changes introduced in August. The minimum purchase is £25, while the maximum holding per person is £50,000.
Deciding which investments are most appropriate for you and your children or grandchildren, and how to structure them, depends upon a range of factors. Tax – both for you and the recipient – is the obvious one, but so too is the level of control you want to exercise and for how long (age 18 is the usual default – but pensions cannot be drawn until the recipients are in their 50s, currently 55).
For a discussion of your options for making gifts, talk to us soon – it’s that time of year.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax or trust advice.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.