Education fees, buying a first car, getting married and saving for a house deposit house are just some of the costs faced by the younger generation. Saving and investing from an early age could be a great way to give your child or grandchild a head start, and one financial product stands out for these sorts of goals – the Junior ISA.
What is a Junior ISA?
Junior ISAs – or Individual Savings Accounts – are tax efficient savings or investing accounts for a child under 18.
Similar to adult ISAs, there are two types of Junior ISA: Junior Cash ISAs and Junior Stocks & Shares ISAs. Cash ISAs are like savings accounts with a bank or building society, whereas the Stocks & Shares variety are long-term investment accounts.
What unites them is any money you make – either as interest on cash or investment income or gains – is free from tax, which can be important for your long-term returns.
Withdrawals are possible from the account from the child’s 18th birthday when it automatically converts to an adult ISA. At this point, a lump sum can be useful to help with the cost of university, or a deposit for a house.
How much can you put in a Junior ISA?
There is an annual limit each tax year per child, which runs from 6th April to the following 5th April. This tax year it is £9,000, an amount that has been fixed until 2030.
How many Junior ISAs can a child have?
A child can only have one Junior ISA account of each type – one Stocks & Shares and one Cash, and the annual allowance can be split in any proportion between the two. This is different to an adult ISA where you can hold as many accounts of the same type as you wish with various providers.
What happens to a Junior ISA at 18?
Once the child turns 18, the account matures and rolls into an adult ISA and they can access the money. Alternatively, they can keep the ISA going and enjoy compounding tax-free returns for even longer.
Can parents withdraw from a Junior ISA?
No, withdrawals can only be made by the child upon Junior ISA maturity once they turn 18. The only exception is if the child dies or is considered terminally ill.
What are the Junior ISA rules for who can contribute?
A parent or legal guardian of an eligible child can open a Junior ISA, manage the account, and make the investment decisions if it is a Junior Stocks and Shares ISA. Family friends, relatives, and grandparents can’t open a Junior ISA unless they are the child’s legal guardian, although they can contribute at any time up to the annual investment limit.
Are JISAs free of inheritance tax?
As a JISA belongs to the child, rather than the parent or any other party who has paid in, it forms part of the child’s estate. In fact, gifting money to children or grandchildren through a Junior ISA can be a great way to reduce the inheritance tax bill on your own estate.
The usual inheritance tax gifting rules and exemptions apply to contributions to a Junior ISA. You can give away a total of £3,000 a year, either to one person or several people, without them paying inheritance tax on it.
Smaller gifts of £250 per person each year are allowed on top, provided they aren't to the same people who receive part of the gifting allowance. Any gifts over and above the £3,000 allowance could be subject to IHT, depending on how long you live for after making the gift, in accordance with the ‘seven-year rule’.
Find out more: Junior ISAs – the secret inheritance tax weapon
The Charles Stanley Direct Junior ISA
The Charles Stanley Direct Junior ISA is easy to manage and flexible. You can contribute ad-hoc lump sums or a monthly amount via direct debit of at least £50. There is also a wide investment choice, including thousands of funds, investment trusts, exchange-traded funds (ETFs) and shares. Please note, we only offer a Junior Stocks & Shares ISAs and not Junior Cash ISAs.
- No set-up costs and competitive charges
- Easy to manage
- Flexible – contribute lump sums whenever you want or a monthly amount of £50 or more
- Wide investment choice
- Award-winning customer service
- Transfer in existing Junior ISAs or Child Trust Funds
- Preferred Fund List for a starting point for your own research or Charles Stanley managed funds
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.
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