Junior ISAs can be a convenient way to save for your children until they are 18. Like a regular ISA, Junior ISAs are tax-free and come in a range of savings and investment accounts.
A Junior Individual Savings Account is sometimes known as a Junior ISA or JISA. These tax-free savings accounts are available to anyone living in the UK who is under 18. There are few exceptions for children of diplomats or UK armed forces personnel who have to live abroad.
Parents, or guardians with parental responsibility, can pay into Junior ISAa. At 18, your child can convert the Junior ISA into an adult ISA and retain the tax-free allowances, as well as funds that you have built up. Don’t close down the Junior ISA, or you will lose the tax benefits.
Junior ISAs work in the same way as the regular ISAs - Individual Saving Accounts - where the interest on the money you save is free from tax. The amount that can be paid in each year is lower - £9,000 compared with £20,000.
Junior ISAs were introduced to replace the Child Trust Fund from 1 August 2011 and the government ceased to make contributions.
There are several benefits of Junior ISAs:
you can have a junior cash ISA and junior stocks and shares ISA
the interest earned is tax-free
when your child turns 18, the account becomes a regular ISA
Individual Savings Accounts (ISAs), whether for adults or children, have the same benefits. You can save your money in them and all the interest, income and growth is free of tax for as long as you hold the ISA.
Where you have a Stocks & Shares ISA, the underlying increase in value of the funds or shares you hold also grows free of any tax and any dividends you receive are tax-free. You lose the tax benefits if you close down an ISA.
A Junior ISA could help to build a nest egg for your child to help them pay their way through college or university, buy their first car, or put down a deposit on a house or flat. When they become 18, the money is legally theirs to use as they wish.
Each Junior ISA runs within a tax year, which is April 6 to April 5 the following year. Within that 12-month period you can contribute up to £9,000 in the 2022-23 tax year for your child.
If you don't pay in the full amount during the tax year, you can't carry the unused allowance forward into future years. However, you can contribute as much or as little as you like up to the £9,000 threshold.
Where you have an older child they may have a Child Trust Fund (CTF) instead of an ISA. Child Trust Funds (CTFs) were available to children born in the UK between 1 September 2002 and 2 January 2011.
With CTFs, the child’s birthday was considered the start of the year and the allowance ran from one birthday to the next
The government topped up the parental contribution in a CTF but not an ISA
The fees for CTFs are often higher than for ISAs
ISAs offer greater flexibility.
If you do decide to switch into a Junior ISA make sure that you ask the new provider to arrange the transfer, and don't close down the existing Child Trust Fund – otherwise you will lose all the tax benefits.
You can't have both a JISA and a CTF at the same time for your child, but you can transfer an existing CTF into a Junior ISA.
In general, Junior ISAs can be more flexible and offer a greater choice of investment products with potentially lower charges, so this might be something to consider.
Junior ISAs are a tax-free way to save for your child. There are two types of Junior ISA - cash and stocks and shares.
You can take out both types of ISA at the same time up to the £9,000 limit. So you could divide the money equally between funds and cash, or you could choose to hold more money in cash, or vice versa.
You can only open one Cash Junior ISA and/or one Stocks & Shares Junior ISA in one tax year.
If you do choose to take out both types of ISAs, they don't have to be with the same provider. However, you'll need to be mindful of the annual limit of £9,000 (2022-23 tax year), which applies to both cash and stocks and shares.
Over the long term, you might want to think about putting some of your money into a Stocks & Shares JISA for your child, as stock market funds have a greater potential to grow than cash.
However, they also carry more risk, so you should consider this as a long term investment and not a place for money that you can't afford to lose.
Where you decide to invest in a Cash ISA, you can find the best Junior ISA cash rates by looking at our comparison tables, which list Junior ISA best buys and Junior ISA interest rates and fixed rates.
Find out more with our top savings accounts for Junior ISAs.
The best Junior ISA is the one that suits your savings needs. You may want to put all of your child’s money into cash in a Cash Junior ISA, because you don't want to risk the capital. Or you may decide you want to have the chance to grow the money. If that's the case, you could consider a Stocks & Shares Junior ISA.
You can open a Junior ISA account with your bank or building society or via an investment platform, but the best way to ensure you are getting the best rate is to shop around the different providers.
Junior ISA rates do vary according to different providers, and by comparing Junior ISAs you can see which financial services company is offering the most competitive rate.
Bear in mind that rates on Cash Junior ISAs can change over time and may revert to a lower rate after 12 months. If you choose a fixed rate Junior ISA make sure you shop around for a better rate once the promotional period ends.
Junior ISAs are sometimes referred to as baby ISAs, as you can open a Junior ISA as soon as your child is born. You can pay in money from friends and grandparents in order to help with your child’s savings goals.
It's a good idea to open a Junior ISA for your baby as soon as you can, as the early you start to save for your child, the longer the money has to grow and accumulate.
For the more information about the various types of ISAs that might suit your family's needs, find out more from our extensive range of guides about savings and investments.