Designated Account
An investment account informally earmarked for a child or purpose, but legally owned by the adult. The adult remains the beneficial owner and is taxed on all income and gains.
By Omair SaoLast reviewed — rates for the 2026/27 tax year. See how we check our figures.
How It Works
A designated account is a standard investment account with a label (usually child's initials) indicating its intended purpose. Legally, it is the adult's account. The adult retains full ownership, control, and tax liability. There is no obligation to use the money for the designated purpose.
Tax Treatment
All income and gains taxed as the adult's at their marginal rates. The designation is a label only — no legal or tax effect. Money remains in the adult's estate for IHT.
Tax Advantages
- Full control — adult can withdraw or redirect at any time
- No restrictions on investment choices or amounts
- Simpler than setting up a trust
Who Is This Suitable For?
Parents or grandparents who want to invest for a child but retain full control and ownership. Unlike a JISA, the adult can withdraw at any time.
Worked Example: £10,000 invested ‘for Ellie’ in her father's name
- 1A father opens a GIA in his own name, designates it with his daughter's initials and invests £10,000.
- 2Dividends of £300 a year (3%) are his income; they use part of his own £500 dividend allowance, which may already be used up by dividends from his company.
- 3Ten years later he sells for £24,000; the £14,000 gain is his, £3,000 is covered by his annual exempt amount and £11,000 is taxable at his CGT rate.
- 4Had he paid £9,000 into a JISA in year one and £1,000 in year two, all the growth would have been tax-free — but Ellie, not he, would own it at 18.
Result: The designation changes nothing for tax or ownership; it is a bookkeeping label that buys flexibility at the cost of the child's allowances.
Illustrative figures using the 2026/27 rules on this page, last checked on 25 September 2026.
Advantages and Drawbacks
Advantages
- You can change your mind: the money can go to another child, to yourself or to an emergency without penalty.
- No trust deed, no registration and no separate tax return are needed.
- Control continues past 18, so the money can be released at 21, 25 or whenever you judge right.
Drawbacks
- Every pound of income and gain is taxed as yours, at your rates, using your allowances.
- The account remains in your estate for IHT, and creditors or a divorce settlement can reach it.
- Handing the investments to the child later is a disposal at market value for CGT and a gift for IHT.
- Some platforms treat a designated account as a bare trust in their terms, which would make the gift irrevocable — check the wording.
Notes for Limited Company Owners
Because the account is legally yours, its dividends stack on top of the dividends you take from the company, so the designation offers no way to spread investment income across the family. Keep the designated account well away from company money to avoid any suggestion of a director's loan.
Common Mistakes
- Believing the designation shelters the income from your own tax return.
- Using a designated account when the money is genuinely a gift, losing the child's tax-free allowances for no reason.
- Mixing family money and designated money in one account, making it impossible to show later what was intended for whom.
Who Should Avoid It
Anyone whose real intention is a permanent gift, and higher-rate taxpayers with no spare allowances, for whom a JISA or bare trust would shelter the same money.
Official Sources
The rules on this page come from the following official pages and were checked on 25 September 2026. Read how we check our figures.
Related Calculators
Frequently Asked Questions
Designated account vs JISA?
A JISA is tax-free but locked until 18 and belongs to the child. A designated account is taxable but gives full control and flexibility.
Does it protect from creditors?
No. Legally owned by the adult, so available to creditors and part of the adult's estate.
Can I transfer to a child later?
Yes, but this may have CGT and IHT implications as it counts as a disposal and gift.