What is a Junior ISA? - 2023/2024

A Junior ISA is a tax-free savings account meant for long-term use, with the goal of accumulating a lump sum for a child by the time they turn 18.

There are two types of Junior ISA:

• Cash Junior ISA – where the money is held in cash and interest is added during the term

• Stocks and shares Junior ISA – where money is invested in equity markets with the aim of obtaining a better return at the end of the term. It is possible to invest in assets other than equities too, such as bonds or funds with a mix of assets.
  

How much can you invest in a junior ISA?

For the 2023/24 tax year, the maximum amount that can be put into a Junior ISA is £9,000 per child. Unused Junior ISA allowance from previous years cannot be carried over to the next tax year.

The Junior ISA allowance is subject to change from one tax year to another. Contributions to a Junior ISA are only allowed until the child turns 18 years old.

Who can set up a Junior ISA?

A Junior ISA can only be opened by parents or guardians with parental responsibility for the child.

Who can contribute to a Junior ISA?

Once a Junior ISA is open anybody can contribute, including grandparents.

What happens to a Junior ISA when a child reaches 18?

A Junior ISA matures when the child reaches the age of 18 and the proceeds are either paid to the child or transferred into an adult ISA for them.

Should I consider a Junior Cash ISA or Junior Stocks and Shares ISA?

If you are trying to build up a sum of money to provide for your child as they enter adulthood then the tax-free status of a Junior ISA is a great investment vehicle. If you start investing/saving when your child is young the greater the eventual value is likely to be when your child reaches age 18. In addition, you can open a Junior ISA from as little as £1 for either a Junior Cash ISA or Junior Investment ISA.

The one disadvantage of using a Junior ISA to save for your child's future is that they are entitled to the proceeds once they reach the age of 18, whether you want them to get their hands on it or not and you have no control over how they spend the money. For most people that isn't a problem. However, if you are concerned about it then you could save via a normal ISA in your name and then gift the money to the child when you want to. Of course this does mean that you use up a portion of your own annual ISA allowance in doing so.