Junior ISAs (JISAs) became available from November 2011.
Both cash and stocks and shares JISAs are available. Children can hold one of each at a time (two accounts in total).
Who is eligible?
All UK resident children under the age of 18 who do not have a Child Trust Fund (CTF) are eligible for JISAs. Anyone with parental responsibility for an eligible child can open a JISA for that child. Eligible children will be able to open JISAs for themselves from age 16.
How much can I pay in?
Anyone can contribute to a child’s JISA up to a limit of £9,000. Between ages 16 and 18 children can hold one of each type of JISA plus an ‘adult’ cash ISA for which the limit is £ 20,000.
Savings in Child Trust Funds can also be transferred to Junior ISAs.
How is it taxed?
Any income or capital gains are tax-free. The parental settlement rules do not apply to parental contributions to JISAs. This means there is no tax liability on the parent which could be the case for other investments. Any investment returns received will be largely tax-free.
All statements about the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change.
How can the child get the money out?
The child owns the account and withdrawals are not normally allowed until the child turns 18. The only exceptions to this would be if the child is diagnosed with a terminal illness or dies.
Unless funds are withdrawn, the JISA becomes an adult ISA at age 18. This will not affect the normal entitlement to ISAs.
A person with parental responsibility manages the child’s JISA until age 16. This person is known as the ‘registered contact’. Children will have the right to manage their accounts from age 16.
What are the risks?
There are many risks that need to be considered:
- Governments can and do change the rules on tax-efficient vehicles, like JISAs.
- A JISA is not a risk-free product and the value may be at risk due to the investments held within the wrapper.
- JISAs can grow but you may not realise the initial sum invested.
- There is no guarantee that you will get more out of a JISA investment than you have paid in.Income generated from investments held in JISAs is variable and is not guaranteed.
- Any capital you place in the fund is available to the child upon attaining the age of 18.
- The child can take control of the account at age 16 but cannot draw the money until they turn 18.
- Past performance is no guarantee of future returns.
- The price of units and the income from them can fall as well as rise.