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INVESTING FOR CHILDREN

Parents, grandparents and other adults often wish to invest on behalf of children. There are various options to consider and Independent Financial Advisers can provide advice if you're considering setting up an investment scheme for someone under the age of eighteen. The following points should be considered before making a decision.

  1. Unit trusts cannot be sold to minors, however adults are able to designate investments, which is an informal way of recording that the investment has been bought for another. Most unit trust application forms have a space where applicants are able to indicate to whom the investment is designated. The designee's initials are all that is required.
  2. If an investment has been designated to a minor it will, never the less, be legally owned by the adult who invested in it.
  3. When the designated person turns eighteen, the original investor may complete a stock transfer form to request for the fund to be transferred into their name free of charge.
  4. If the fund is an income fund and generates over £100 during any tax year, it will be treated as the parent's income and taxed accordingly. This applies until the child is eighteen unless they get married before that time.
  5. Children have the same personal tax allowance as adults up to the age of 65 (£5,225 for the tax year 2007/08 and £5,435 for the tax year 2008/09). They also benefit from the full annual Capital Gains Tax allowance (£8,800 for the tax year 2006/07 and £9,200 for the tax year 2007/08).
  6. People under eighteen may not buy stocks and shares ISAs, although anyone over the age of 16 can have a cash mini ISA. An ISA cannot be designated to anyone other than the original investor(s). Should an adult wish to invest in an ISA and then give the investment to a child once he or she has turned eighteen, the ISA will need to be sold and re-purchased under a new name which may have tax implications. Find out more about Artemis ISAs in our brochure or in the Investment Classroom.

The information provided is based upon current legislation at the time of print and may change if the law changes. The value of tax relief will depend on your individual circumstances.