The introduction of the Junior ISA has created an interesting loophole for 16 and 17 year olds.
Whilst an investment ISA is not available until age 18, you can contribute to a cash ISA from age 16.
It is also possible to invest in a Junior ISA at ages 16 and 17.
What this means in practice is that both the adult (cash) and Junior ISA allowances are available at age 16 and 17.
16 or 17 year old children (or their parents) can therefore use the cash ISA allowance of £5,340 and the Junior ISA allowance of £3,600 before the end of the tax year.
The adult cash ISA allowance is scheduled to increase to £5,640 for the 2012/13 tax year, assuming no nasty surprises in the Budget next month.
Under current rules, both the cash ISA and Junior ISA could then be converted into an investment ISA at age 18, giving a young investor a head start on their ISA fund.
Our thanks to Paul Kennedy, head of tax planning at Fidelity, for pointing out the availability of both allowances to some investors.
Photo credit: Flickr/bignoseduglyguy
