The nation has been gripped by the birth of the Duke and Duchess of Cambridge’s third child, Prince Louis.
His parents, William and Kate, may not have too much to worry about when it comes to supporting their new baby financially, but there are steps you can take to give your loved ones a future fit for a king or queen.
Parents can set up a Junior ISA and save a set amount, currently up to £4,260 for the 2018/2019 tax year, in a cash or stocks and shares product tax-free. The money can be accessed by the child once they turn 18, so if you start when they are born there is potential for it to be worth a lot of money once your son or daughter becomes an adult.
The value of an investment and any income from it can fall as well as rise and you may not get back the original amount invested.
That is a lot of money to handover to an 18-year-old, so there are other options that let you retain control if you wish.
If parents want to keep control they could consider maximising their own ISA allowance before they invest in a Junior ISA. Contributions made into an ISA in the parent’s name can still be used to fund the child’s future, but the parent would retain control over when and how the money is spent
Another option is setting up and assigning a portion of an offshore bond to a child for when they reach 18. This has similar tax efficiencies to a Junior ISA as the funds can grow tax free (except for withholding tax) and there is no capital gains tax.
Parents can assign segments of the offshore bond to their child when they reach 18 and there may be no income tax to pay if the child is not working and the growth is below the relevant personal and savings allowance.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
For tax advice please refer to an accountant or tax specialist.