Find out everything you need to know about the new Junior ISAs with our Junior ISA Factsheet.
What is a Junior ISA?
Junior ISAs (Individual Savings Accounts) are tax-free savings & investment accounts for children.
They were introduced on 1st November, 2011 as a replacement for the outgoing Child Trust Fund, and are designed to help you save for your child’s long term future.
Consequently, any money saved or invested in a Junior ISA cannot be withdrawn until your child turns 18.
There is an annual limit to how much you can save or invest in a Junior ISA tax free – the limit for 2013/14 is £3,720. If you don’t use this annual allowance in full before the end of the tax year (5th April) then you lose it; you cannot carry over any unused allowance from one year to the next.
Who can get a Junior ISA?
Any child that didn’t qualify for a Child Trust Fund and is still under 18 can open a Junior ISA. Essentially this means that any child born before September 2002 or after 3rd January 2011 is eligible for a Junior ISA.
If your child has a Child Trust Fund they cannot open a Junior ISA. At present it’s not possible to transfer money in a Child Trust Fund to a Junior ISA but this may change in the future.
Types of Junior ISA
There are two different types of Junior ISA: Junior Cash ISAs and Junior Investment ISAs; it is possible to open one of each type of account for your child.
Junior Cash ISAs
How do they work?
Junior Cash ISAs work just like children’s savings accounts
Junior Investment ISAs
How do they work?
- Junior Investment ISAs help you to invest for your child tax free
- Save up to £3,600 each tax year minus any money saved in a Junior Cash ISA that year
- No capital gains or income tax on any profit
- Choice of investment options
- Decide how risky you’re willing to be with your investment choices • Invest a lump sum or make regular investments
- Management fees will apply
What else do I need to know?
- Your child can only hold one Junior Cash ISA and one Junior Investment ISA at a time
- Junior ISAs can only be opened by parents or guardians but can be contributed to by grandparents, relatives & friends too
- Money saved in a Junior ISA cannot be withdrawn until your child turns 18
- Once your child reaches 16 they can manage their own Junior ISA
- Once your child turns 18 they will be able to withdraw the money and spend it as they wish
How to choose a Junior Cash ISA
- How much do you want to open the account with?
- Do you want a fixed rate or flexible account?
- How do you want to save – pay in a lump sum or save on a regular basis?
- Compare Junior Cash ISA accounts. You can find full details of all the Junior Cash ISAs available in our Junior Cash ISA comparison table
- Look for accounts that suit the way you want to save for your child • Find the Junior Cash ISA with the best possible interest rate that meets your requirements
- Open a Junior Cash ISA for your child
- Set up a standing order if you plan to save on a regular basis
- Make a note to review the account at the end of any fixed rate period, or at regular intervals
How to find a Junior Investment ISA
- How much do you want to invest – both initially & on an ongoing basis?
- What type of investments do you want to make for your child?
- Are there any market areas or regions you would like to invest in?
- What level of risk are you willing to take on your child’s savings?
- Do you want to manage the investments yourself or have them managed for you?
- Compare Junior Investment ISAs. You can find full details of all the Junior Investment ISAs available in our Junior Investment ISA comparison table
- Find the Junior Investment ISA that offers access to the investments you’re interested in
- Check the account management fees so you get a Junior Investment ISA that costs as little as possible to manage
- Open a Junior Investment ISA for your child
- Select individual investments if you have chosen to manage the Junior ISA directly
- Regularly check how your child’s investments are performing
Can you transfer ISAs?
A child cannot ever have more than one Junior Cash ISA and one Junior Investment ISA at a time. However, you can transfer money from one Junior ISA to another with a different provider in search of a better return.
You can also transfer money from a Junior Cash ISA to a Junior Investment ISA, and money in a Junior Investment ISA to a Junior Cash ISA should you wish.
However, if you want to transfer your child’s Junior ISA savings you must get their current Junior ISA provider to do it for you - this is the only way to guarantee their money’s tax-free status.
You will need to:
- Check the new Junior ISA account accepts transfers in (ideally before you apply)
- Check whether you will be penalised or incur a charge for moving money from your child’s existing Junior ISA account, and if so work out whether it is still worth your while
- Open the new Junior ISA account in your child’s name
- Ask the new account provider to transfer the funds in your child’s existing Junior ISA to the new Junior ISA account. Don’t just withdraw your money yourself or it will lose its tax free status.
At present it is not possible to transfer money in a Child Trust Fund into a Junior ISA or vice versa.
Need more information about Junior ISAs?
Our guides explain everything you need to know about choosing the best Junior ISAs. Visit money.co.uk ISA guides for more information.