Introduced in 2011 to maximise tax-free savings for children, over 1.2 million Junior ISAs are regularly paid into in the UK. In total, over £9 billion in assets resides in Junior ISAs nationwide – but what specifically are they? Independent Financial Adviser, Oliver Pescott Frost, explores whether they’re worth setting up for your children.
What is a Junior ISA?
Junior Individual Savings Accounts (or JISAs) are tax-free, long-term savings accounts for children under the age of 18. In the 2024/25 tax year, the annual savings limit is capped at £9,000.
While these are exclusively for British citizens, if your child is located outside of the UK, they may still be eligible to have a JISA set up in their name. For example, if you are a ‘Crown servant’ (i.e. in the UK’s armed forces, a civil servant, police officer or judicial official) and they depend on you for their care, you can set up a JISA.
Is there just one type of Junior ISA?
No. There are two types of Junior ISA: one is a Cash ISA, and the other is a Stocks and Shares ISA.
In the cash account, you will simply not pay any tax on interest on the cash you’ve saved. Whereas within the Stocks and Shares account, your money will be invested, and you will not pay tax on any gains made.
Your child can have one, or both types of ISA, as long as the £9,000 yearly limit is not exceeded – or else you’ll be liable to Capital Gains Tax.
Parents and guardians will need to open the ISA, but the money belongs to the child and will be solely in their name. It’s also worth noting that you cannot have a Junior ISA as well as a Child Trust Fund; if you want to open a JISA, you’ll need to ask the provider to transfer the trust fund in full.
Are they worth setting up for my children?
There are many reasons why it’s a good idea to set up a Junior ISA for your children. The earlier you make the decision, the better you’ll set them up after their childhood as they head into the excitement and challenges of adult life.
Here are some of the many advantages of a Junior ISA:
- Help to set your child up for entering adulthood – for expenses including learning to drive, higher education, or even stepping on the property ladder
- JISAs are very tax-efficient
- Stocks and Shares JISAs will invest your money in the stock market, meaning they’ll have good potential to grow in the long term (although you do need to be aware of the varying levels of investment risks too)
- In a Cash ISA, your money is 100% protected and will not devalue
- Money is locked in and cannot be accessed by anyone except your child, and only when they turn 18
- JISAs are a great way to educate children about money and savings while teaching them valuable financial management skills
- Setting up Junior ISAs early enough can help to reduce inheritance tax
Where can I set up a Junior ISA?
You can set up a JISA with a range of banks, building societies, credit unions, friendly societies and stock brokers.
At Matthew Douglas, we’re here to help make your investments as easy and stress-free as possible, while making your money work for you. Get in touch today to discuss how we can help maximise your investments while minimising your various tax liabilities.