How much can a family pay into ISAs in a single tax year?
Here’s an example of a question about ISA annual subscription limits that’s been known to catch a few people out in the CII’s R02 and R03 examinations.
THIS ARTICLE IS RELEVANT TO EXAMINABLE TAX YEAR 2020/21.
Jane and Ged are married with two children, Emma, aged 14, and Alex, aged 17. What is the total amount of money they can pay into ISAs as a family in 2020/21?
Before we take a look at the answer, let’s remind ourselves of the ISA limits for the current tax year.
The maximum annual subscription limit is £20,000. Investors can therefore subscribe up to £20,000 into a cash ISA, a stocks and shares ISA, or an innovative finance ISA. Alternatively, they can split the £20,000 across all three types.
Eligible investors can invest up to £4,000 of the £20,000 limit into a Lifetime ISA. Note that this is part of, rather than in addition to, the annual limit.
Jane and Ged can also contribute into Junior ISAs for Emma and Alex. For 2020/21, the annual subscription limit for Junior ISAs is £9,000.
So, at first glance, it might look like the correct answer should be £58,000. £20,000 each for Jane and Ged and £9,000 each for Emma and Alex. Chances are, that would be one of your answer options in the exam.
Here’s an example of a question about ISA annual subscription limits that’s been known to catch a few people out in the CII’s R02 and R03 examinations. Share on X
However, while an investor must be 18 or over to open a stocks and shares, innovative finance or Lifetime ISA, the minimum age for a cash ISA is only 16.
At 17, Alex is eligible for an adult cash ISA. Jane and Ged can therefore invest an additional £20,000 into a cash ISA for Alex. This is on top of his Junior ISA allowance.
The correct answer is, therefore, £78,000, as set out in the table below:
| Family member | Age category | Subscription limit |
|---|---|---|
| Jane | Adult | £20,000 (Adult ISA) |
| Ged | Adult | £20,000 (Adult ISA) |
| Emma | Child, under 16 | £9,000 (Junior ISA) |
| Alex | Child, 16 - 17 | £9,000 (Junior ISA) PLUS £20,000 (Adult Cash ISA) |
Take care when you see a question along these lines. Before answering, be sure to note the number of adults (one parent or two), the number of children under the age of 16, and the number of children aged 16 – 17. That way you can determine eligibility for the various ISA products and then add up the appropriate subscription limits to arrive at the correct answer.
One final point of interest, whereas the parental settlement rules do not apply to Junior ISAs, they do apply where a parent contributes into a cash ISA in their minor unmarried child’s name. This means that if a child’s income generated from capital gifted to them by a parent exceeds £100 a year, it will be treated as the parent’s income. The parent will need to report the income via self-assessment, and it may become taxable.
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