Junior ISAs and tax relief: benefits and considerations
Junior ISAs (JISAs) are a great way to give your child a boost into adult life. But did you know there are also tax benefits to saving money in a junior ISA?
Find out about the tax benefits of JISAs and how you can give your children a tax-free lump sum when they turn 18.
How do junior ISAs work?
JISAs are tax-free savings accounts for children. They can be opened by a parent or legal guardian of any child who is 17 years old or younger and doesn’t already have a Child Trust Fund. Children must be 15 or younger to be eligible for a OneFamily Junior ISA.
The money that’s paid into a JISA is locked in for the child and they’ll only be able to access it when they turn 18. This means there’s no temptation to dip in early.
You can choose to open a cash JISA, where your money grows by building interest, or a stocks and shares JISA, where your money is invested in the stock market. Alternatively, children can have both a cash JISA and a stocks and shares JISA in their name.
What are the tax benefits of junior ISAs?
JISAs are a great way to help your child financially at the start of their adult life, and the tax benefits of JISAs mean the government doesn’t take a cut. No matter how much the money you put in grows (either by building interest or by being invested in the stock market), there won’t be any capital gains or income tax due.
Each child has an annual allowance of £9,000. This is how much money can be put in their JISA each tax year. This limit resets every year on 6 April, just like other ISA allowances.
The annual JISA allowance is per child, so if they have two JISAs in their name, the allowance is shared between both products (a child can have both a cash and a stocks and shares JISA).
Your child won't pay any tax on their junior ISA
When your child gets access to their money at 18, they won’t have to pay any tax on it, no matter how much it’s grown by. This includes any returns they might get from interest built in a cash JISA or having their money invested in a stocks and shares JISA.
You don't pay any tax on the money you pay in
You have probably already paid income tax on the money you choose to save for your child, but there is no extra tax to pay for putting it into a JISA.
Your child’s junior ISA allowance won't affect your own ISA allowance
Since the money in your child’s junior ISA legally belongs to them, their £9,000 annual allowance doesn’t affect your own £20,000 ISA allowance. This means that if you hit the limit on your own ISA, you can still put money away in a JISA for your child.
Your child's junior ISA can help reduce inheritance tax
If you’d like to leave your child or grandchild some money for when you’re no longer around, a JISA can be a good way of gifting it to them without having to pay inheritance tax on it.
What happens when a junior ISA matures?
Your child can take control of their account at age 16, but they will only be able to access the money at 18. This is when their JISA “matures”, which means they’ll be able to take the money out or reinvest it. It will be up to them to decide what to do with it.
There are a few options available:
- They can leave their money invested in their adult ISA, though no more money can be paid in.
- They can withdraw some of their money and leave the rest invested in their adult ISA.
- They can withdraw some of their money and reinvest the rest into another product, like a lifetime ISA or a stocks and shares ISA.
- They can withdraw all of their money.
You can find out more about your child's options for when their JISA matures in our Next Steps guide.
Whatever your child decides to do with their JISA when they turn 18, you can rest assured that they won’t need to pay any tax.
Our OneFamily Junior ISA
With our stocks and shares Junior ISA you can start investing from just £10 per month up to a maximum of £9,000 each year on behalf of a child. Anyone can pay in, and the child will gain access to the account once they are 18 years old.
Stocks and shares JISAs have good long-term growth potential, but the value of your investments can go up or down and your child could get back less money than you’ve put in.
Find out more about junior ISAs
What would you like to do next?
Start saving today
Your kids deserve a head start. Invest in your children's future with our stocks and shares Junior ISA for tax-free savings
Transfer a child trust fund or junior ISA
Transferring a child trust fund or junior ISA from another provider to OneFamily is simple and we don't charge you to do so.
Learn more about junior ISAs
Find out more about how a JISA can help you save for your child's future.