Is it possible to open an investment account for your 10 year old child?

04 February 2022

Question by Harriet

Hi - In the UK is it possible to open an investment account for your 10 year old child?

Answered by

Hi Harriet,

Thank you for your question.

There are certain structures available that will allow you to make investments in your child's name. I have outlined some of the key investment options, including their pros and cons below. Please bear in mind that any investment should have a minimum 5-year timeframe. If it is likely the funds will be accessed in the short term a cash-based solution may be more appropriate.

1. Junior Stocks and Shares ISA - you can open a Junior ISA for any child under the age of 18. Once your child turns 18 this will automatically become an adult ISA and your child will gain access to the money. You can invest up to £9,000 in the 2021/22 tax year, and any income or growth will be tax-free.

2. Pension - You could set up a pension on behalf of your child and pay in regular amounts. The money will be available to your child in retirement from the normal pension age (currently 55 but increasing), but they can take over control of the investments at 18 and make contributions themselves. You can make a maximum permitted pension contribution of £2,880 per annum which will receive basic rate tax relief of 20% making a total contribution of £3,600.

3. General Investment Account - You can hold investments on behalf of your child in a designated investment account. Whilst this pot will be earmarked for your child, the funds will still be treated as your own, and as such any taxable income will be assessable against you. Any income earned over £100 per year will be added to your own income and potentially subject to income tax, and any capital gains over your annual exempt amount will be subject to Capital Gains tax. The main benefit of this pot is that you are starting to accumulate a pot that can be passed on at 18. However, you are under no obligation to hand over control of the investments at 18 if it is not appropriate to do so.

4. Trust - You could set up a trust which holds investments for the benefit of your child. Trusts are complex structures and I would suggest speaking with an adviser if you would like to consider this option further.

Before proceeding with any investment I would suggest speaking with a financial adviser about your options to ensure you make the right choice for you and your child.

I hope this helps, all the best.