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In 2018-2019, allowance under ISA for UK residents over 18 years has been fixed to 20,000 pounds where ISA can be cash-based, stock or share based, flexible, or it can be an innovative kind of ISA investment option. The rules of flexible ISA is applicable to other types of cash-based ISA, but junior ISA is not cash –based and are not flexible.
The investment under ISA gets rebate on capital gains but all the benefits claimed under the scheme should be claimed in the fiscal year (April 2019), otherwise, the benefits will be lost. The Junior ISA is the scheme offered for children below 18 years and a legal guardian or the parent of the child can invest in such schemes. Even grandparents or family friends can invest under such schemes.
Junior Cash ISA offers opportunities to parents to save in government schemes for their children, where earnings from such schemes are tax free and inaccessible until the child turns 18. People looking for investment in long terms safe options can go for such schemes, supported by government.
Legal guardians or parents can invest up to £4,260 in such schemes and earn up to £145 per annum. The rise in investment in Junior ISA was 7.5 per cent in 2016-2017. Inflation is at about 3 per cent in the UK and some ISAs providers offer more than 3 per cent rates such as the Nationwide, Coventry Building Society and the Tesco Bank.
Junior ISA was launched in 2011 introduced, mainly, to replace the Child Trust Fund, to provide long term investment options for parents to save for their children. These options are similar to adult ISA but the money is inaccessible until the child attains 18 years.
Although, it is tax-free, there has a limit of 100 pounds where if the child gets more than 100 pounds interest, the parent will have to pay tax on interest. The tax is not applicable on money paid by relatives or grandparents.
Most such ISAs provide tax-free saving and the limit of ISA is 20,000 pounds. These are personal saving allowance, introduced in April 2016. A basic tax payer can save up to 1000 pounds on the investment in such schemes. Short term ISA’s are also available in market where one can get instant access to the ISA amounts, or one can invest in ISAs that locks the money for specified period.
There are other types of ISA – such as the Lifetime ISA, offered for people below 40 years (and more than 18 years), which may provide bonus up to 1,000 pounds. The money is locked for longer durations and can be withdrawn on completion of term to make huge investments in buying a house or for handling financial crisis.
Junior ISA is a secure investment but the interest rates are not very attractive. There are other alternatives such as National Saving Schemes, bonds and trust which provide better rates. Some funds such as the UK fund are not very risky but provide attractive returns. Some experts recommend investing in multiple assets in various sectors, or in low cost tracker funds.
To know more about junior saving schemes, click 99 Alternative – (http://www.99alternatives.com).
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