A Junior ISA as part of inheritance tax planning

24 August 2018

By Mark Albinson, Director The Children’s ISA

Planning to reduce a client’s future inheritance tax liability is a key part of financial planning and the services that you offer as a Financial Adviser. It is easy to focus on the complexities of IHT and often overlook the smaller allowances available to clients. Making gifts to friends and family is a good way to both reduce the value of an estate for Inheritance Tax purposes and benefit the ones closest to your clients immediately. 

Junior ISAs are available for any child under 18 who doesn't already have a Child Trust Fund, and you can contribute up to £4,260 each tax year and are tax free. The provision of a Junior ISA for a child or a grand-child has benefits for all; the child has money saved for them which is in trust until they reach the age of 18 and become an adult, whereby they take control of the money. Contributing into a Junior ISA is a great way to reduce the value of an estate and therefore reduce any Inheritance Tax liability for your client.

There are a number of ways that a Junior ISA could be utilised within an Inheritance Tax plan, the easiest way is for a client to set up a regular amount each month into a Junior ISA for a child or grandchild as a gift out of income. These are exempt from inheritance tax, as long as they don’t affect the lifestyle of your client. **

Alternatively, if a regular payment is not an option, the use of gifts to Junior ISAs should be considered, either by contributing a sum less than £250 every Birthday and Christmas or the clients’ whole £3,000 annual gift exemption.

The money is invested for the Child into a Junior ISA savings account is tax-free and ensures that the intended recipient will receive the money when they are likely to need it at the start of adulthood, whether it be for a deposit for a house, a first car or university fees.  

The Children’s ISA is a stocks & shares Junior ISA working in partnership with Simplybiz & Verbatim. We enable advisers to offer a cost effective Junior ISA platform to their clients and offer remuneration for any introductions made.

For more information contact info@thechildrensisa.com


** It is important to note that the payment must be out of income, not capital. If the payment is out of capital, then clients are limited to £3,000 per annum or £6,000 if the previous year’s gift allowance was unused.

The value of investments and any income from them can go down as well as up and is not guaranteed. Your clients could get back less than they originally invested. Past performance is not a guide to future performance.

The portfolios' investments are subject to normal fluctuations and other risks inherent when investing in securities. Verbatim Asset Management has taken due care and attention in preparing this document, which is solely for the use of professional advisers. Verbatim cannot be held responsible for any inaccuracies arising out of information detailed within and will not accept liability for any loss arising out of or in connection with its use.