What is Junior ISA – JISA?

A Junior ISA (JISA) is a long-term tax-efficient savings plan that can be opened by a parent or legal guardian to invest in their child’s future, allowing their child to receive a tax-free lump sum once they’ve turned 18 years old.

The parents can contribute a maximum of £9,000 in a tax yea. This allows you to save for their future without paying income tax or Capital Gains tax on any returns.

Who can have a Junior ISA (JISA)?

You can open a JISA of your child if they are

• Under 18
• Living in the UK
• Does not hold a Child Trust Fund (CTF), But if you want to open a Junior ISA ask the provider to transfer the trust fund into it.
• If your child lives outside the UK they can only open a Junior ISA if you are a Crown servant (for example, you work in the UK’s armed forces, diplomatic service or overseas civil service)
• If your child lives outside the UK and the child depends on you for care

Who can contribute to a Junior ISA?

• While only a parent or legal guardian can open a Junior ISA, family and friends are able to contribute into the plan alongside them to help the child’s fund grow.
• The amount you choose to invest for a child is entirely up to parents or family members, however it cannot be more than their annual Junior ISA allowance (£9,000 for the current tax year)

Types of Junior ISA

• Junior Cash ISAs

A Junior Cash ISA is similar to a bank or building society savings account although the money is locked in and cannot be withdrawn until age 18. But Junior Cash ISAs come with one big advantage – your child doesn’t have to pay tax on the interest they earn on their savings.

• Junior Stocks and Shares ISAs

Junior Stocks and shares ISA account, you can put your child’s savings into investments like Unit Trusts, Investment Trusts, Stocks and shares, Bonds etc. Any profits you earn by investing are free from tax. Investments are riskier than cash but could give your child a bigger profit, and the value of a Junior Stocks and shares ISA can go down as well as up.

What happens to a Junior ISA at age 18?

When the child is 18 years old and their plan reaches maturity, then he can withdraw all funds or can be transfer into an adult ISA where he can continue saving.

Which Junior ISA is right for your child?

Your child can have a Junior Cash ISA, a Junior Stocks and Shares ISA or both. If they have both, the most they can save is still subject to a £9,000 limit for the 2023-24 tax year.

If you would like to learn more about how you can make use of your JISA allowance to build wealth tax efficiently for your children, or if you would value a review of any existing JISA arrangements, why not get in touch with us and arrange a free consultation today with one of our expert advisers.