What happens to a Junior ISA when the child turns 18?

Q: I am considering opening 2 Junior Stocks and Shares ISAs for grandchildren with £5,000 in each. For a child who is ten, is there an option at 18 years old to transfer the pot to an adult stocks and shares ISA?

A: When a child turns 18, their Junior Stocks and Shares ISA automatically ‘matures’ and becomes an adult, or regular, Stocks and Shares ISA.

There’s nothing you or the child need to do for this to happen. All existing investments are moved across automatically. If you open a Junior ISA with Fidelity, we’ll write in advance to the parent or guardian, as well as to the young adult, to confirm when the account has matured.

At this point, any direct debits into the Junior ISA will stop automatically, so there’s no action needed from anyone making regular payments.

The named account holder then takes control of the ISA. From this point only the now-adult account holder can manage the account. To start paying their own money into the regular ISA, they’ll need to complete the relevant ISA declarations and provide their National Insurance number. Once this process is complete, they’ll be able to add their own money to invest.

• Get our updates on markets, ISA funds, pension saving and much more

A quick note about inheritance tax

You mention putting £5,000 into each of the Junior ISAs. From an inheritance tax perspective, each person can usually give away up to £3,000 in total each tax year (known as the annual exemption) without it counting towards their estate. This amount can either be gifted to one person or split amongst many. If you haven’t touched this allowance in the previous tax year, it can be carried forward for one year, which means up to £6,000 in total may be covered.

If a gift is above the available allowance (for example, the £10,000 you’ve mentioned) it can still fall outside of inheritance tax provided you live for seven years or more after making the gift.

For more detailed information, you can read about the current gifting rules on the gov.uk website, and you may wish to speak to a specialist tax adviser if you’re unsure how they apply to your specific circumstances.

Got a burning question you want to ask? Why not drop us a line. Click here to ask your question.

• Read: 4 fund picks for a Junior ISA
• Read: Junior ISA boom: which funds are parents buying?
• Read: 7 investing rules of thumb

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Junior ISAs are long term tax-efficient savings accounts for children. Withdrawals will not be possible until the child reaches age 18. A Junior ISA is only available to children under the age of 18 who are resident in the UK. It is not possible to hold both a Junior ISA and a Child Trust Fund (CTF). If your child was born between 1 September 2002 and 2 January 2011 the Government would have automatically opened a CTF on your child’s behalf. If your child holds a CTF they can transfer the investment into a Junior ISA. Please note that Fidelity does not allow for CTF transfers into a Junior ISA. Parents or guardians can open the Junior ISA and manage the account but the money belongs to the child and the investment is locked away until the child reaches 18 years old. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice