Every birth is a special occasion, but few arrivals grab the public’s attention like a new member of the royal family.
The Duke and Duchess of Cambridge’s third child, little brother to Prince George and Princess Charlotte, is now fifth in line to the throne and guaranteed a life of luxury.
For those of us who aren’t royalty, the financial implications of parenthood could be enough to give you sleepless nights – something all new mums and dads will need to get used to! According to a study by the Centre for Economics and Business Research for insurance firm LV, the cost of raising a child from birth to the age of 21 is almost £232,000 – that’s more than the average UK house price.
The early years are the most expensive, with childcare costs making the biggest dent in the family finances, but it’s important not to lose focus on the long term. Setting up a savings or investment account sooner rather than later will pay dividends when your little one is not so little anymore and preparing to fly the nest.
ISA options for junior
Junior ISAs were introduced in November 2011 as a replacement for Child Trust Funds, which are no longer available to new customers.
To have a Junior ISA, the child must be under 18 and living in the UK. The maximum that can be paid in for the 2018/19 tax year is £4,260. That compares with the current adult ISA allowance of £20,000.
There are two types of Junior ISA – Cash and Stocks & Shares – and your child can have one of each. Like their grown-up counterparts, the returns are tax free*.
Parents or guardians with parental responsibility can open and manage a Junior ISA. Any money paid in belongs to the child, who can take control of the account when they’re 16 – but they can’t withdraw any money until they reach the age of 18.
An interesting loophole opens up when the child turns 16 – as well as their Junior ISA, they’ll be able to open their own adult Cash ISA. This means that children aged 16 and 17 have a total ISA allowance of £24,260 this tax year.
Junior ISAs automatically turn into adult ISAs when the child turns 18 – presenting an opportunity to start investing in peer-to-peer (P2P) loans. The Innovative Finance ISA (IFISA), which launched in April 2016, allows you to invest up to the full ISA allowance in P2P loans, with no tax to pay on your returns*.
The newest addition to the ISA family is the Lifetime ISA, available as either Cash or Stocks & Shares. You must be aged 18 to 39 to open a Lifetime ISA, and you can contribute up to £4,000 a year, until you’re 50, to save for later life or buy your first home. The government adds a further 25% each year.
The Innovative Finance ISA
LendingCrowd was one of the first P2P platforms to offer an IFISA and our Growth ISA is aimed at those who want a quick and simple method of creating a diversified portfolio of asset-backed P2P loans. The Growth ISA targets a return of 6%** and becomes more diversified over time, automatically reinvesting repayments in additional loans.
It’s easy to transfer existing Cash ISAs, Stocks & Shares ISAs, Lifetime ISAs and IFISAs to us. You can make either full or partial transfers from ISAs opened in previous tax years, and full transfers of ISAs opened in the current tax year. The minimum transfer value we accept is £1,000.
Before you can transfer to us, you first need to open your LendingCrowd Innovative Finance ISA account online. Then complete our transfer form and post it to us, and we’ll contact your existing ISA manager to organise the transfer of funds.
The process normally takes between 15 and 30 days, depending on the type of ISA you’re transferring to us. By making a transfer this way, rather than closing your existing ISAs and moving the funds, you’ll maintain the tax benefits* you’ve built up.
To find out more about P2P investing and IFISAs, take a look at our account options or call 0345 564 1600.
*As an investor, it’s important to remember you’re lending to businesses so your capital is at risk. Tax treatment depends on the individual circumstances of each investor and may be subject to change in future.
**Capital at risk. Target rate is variable, net of ongoing repayment fees and bad debt.