With the net closing on assets that fall beyond the scope of Inheritance Tax (IHT), it is increasingly important for those wishing to preserve their financial legacy to consider new options for saving and investing.
This is going to be more important as unspent pensions will be pulled into consideration for IHT from April 2027.
A Junior ISA might be a good way of transferring wealth to your children or grandchildren while you are still alive without worrying about a hefty tax bill.
What is a Junior ISA?
Like with adult ISAs, Junior ISAs have a savings limit that refreshes every tax year and should be maximised as early as possible to reap the most reward.
The savings limit for a Junior ISA in the 2026/2027 tax year is set to be £9,000, unchanged from the 2025/2026 tax year.
That means that if you feel that Junior ISAs are a good investment strategy for you, then there is still time to place funds in one before the new tax year begins.
A Junior ISA can only be set up for people under the age of 18 and they get full access to the funds when they turn 18.
It is possible to have a Junior Cash ISA and a Junior Stocks and Shares ISA, but one person cannot have more than one of each.
How can a Junior ISA help keep Inheritance Tax bills down?
The best advice for keeping IHT bills down is often centred on gifting money and assets to ensure that they are not going to be part of your estate when you die.
While this might be fine advice if you can trust the mental capacity of your loved ones, the thought of giving a child thousands of pounds is a reasonable cause for concern.
Rather than trying to get your six-year-old grandchild to not clear out the local sweet shop and lay the groundwork for your dentist’s own retirement plans, a Junior ISA is a good way of giving them money without fear of it being wasted.
You have a £3,000 allowance each tax year that can be gifted without falling into the scope of IHT.
This means that you could fill up a third of a Junior ISA without worrying that you will eventually face a tax bill.
If you elect to gift more, you may end up paying tax if you die within seven years of giving the gift, although the tax is calculated at a tapered rate.
You may have more than one child or grandchild that you would like to give financial gifts to and a Junior ISA for each may still be an effective way of managing this.
While it might not be possible to maximise the investment in multiple Junior ISAs every year, it is possible to give regular gifts that can often fall outside the scope of IHT.
For gifts to qualify for exemption, they must be made regularly, be from your surplus income and not impact your standard of living.
If you have just received a promotion or pay rise and no longer feel that topping up your own pension is the best way to manage your wealth, gifting your new surplus income to your heirs may be better in the long run.
Ultimately, every estate is different and tax planning needs to be robust enough to match your specific circumstances.
Our expert team can get to know your position and give you advice that will help you keep your IHT obligations under control.
To explore a full range of tax planning options, speak to our team today.
