A junior ISA is a tax-efficient way to save money for a child, as there’s no UK income tax or capital gains tax payable on any returns.
Each tax year, anyone - including parents, relatives, or friends - can contribute up to the junior ISA allowance in either a stocks and shares junior ISA, a cash junior ISA, or both. Though the accounts shouldn’t exceed £9,000.
If you'd like to open an account for a child, they must be under the age of 18. The account can be set up by a person with parental responsibility for the child, or the child themselves, if they’re aged between 16 and 18.
The person who manages the junior ISA is known as the registered contact. Even if a child is the registered contact at the age of 16, they can’t withdraw any money until they turn 18. As the child turns 18, the junior ISA automatically turns into an ISA. The tax benefits are retained, and the child can take full control of the account.
If a child was born between 1 September 2002 and 2 January 2011, they may have a savings account called a Child Trust Fund set up in their name. This was a government backed scheme that has been replaced by the junior ISA.
Both saving schemes carry tax advantages, so it’s not possible to have a Child Trust Fund and a junior ISA. However, some providers will transfer funds from a Child Trust Fund into a junior ISA.
If you're looking for a tax-efficient way to save for a child and to give them a financial head-start in life once they turn 18, you can find out more about a junior ISA on our website.
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