Financial Planning

Why Gift an Investment Fund to Your Children?

KLOFinancial |

As we creep towards the end of January and with the festivities well and truly over, 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 into a child’s future? With the help of a local financial adviser, you can organise your finance for inheritence tax planning and provide gifts to the children in your family. Depending on your own preferences and personal circumstances, there are a range of different products you may be interested in:

Junior ISAs (JISAs)

  • The overall investment you can make in the current tax year is £4,368 for each child.
  • The funds are free of UK tax on investment income and capital gains.
  • They are also outside the anti-avoidance rules on parental gifts to minor children.

A Personal Pension

  • Grows free of capital gains tax and there is no income tax until benefits are drawn.
  • As well as this, 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

  • Investment funds are typically gifted to children by creating a bare trust, but there are other routes 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

  • They have become easier to buy for children following changes introduced in August.
  • The minimum purchase is £25, while your maximum holding per person is £50,000.

Deciding which investment is most appropriate for you and your children or grandchildren will depend on a variety of factors. Tax remains one of the most obvious factors, but you should also consider the level of control you want to exercise and for how long. Usually, age 18 is the default.

For a discussion on your options for making gifts to your loved ones, give us a call on 01926 492406. Get in touch with a local independent adviser today.