In the tax year 2022 to 2023, around 1.25 million Junior ISA accounts were subscribed to, growing from 1.21 million in 2021 to 2022. 

Junior ISAs have become increasingly popular for many reasons, including several tax perks that allow parents to save more effectively for their children. While savings of £100 in a tax year would be subject to the tax rates of parents for instance, a Junior ISA paves the way for savings without being taxed on the interest or gains. 

Because it’s tax-free, account holders get to keep more of their returns, and this can empower parents to reinvest profits to generate a larger nest egg for the future in a process known as compounding. 

The tax-free perks of Junior ISAs mean that they’re one of the most effective ways for parents to help their children build their wealth ahead of adulthood, but how do they work? And what happens when your child turns 18? Let’s explore nine commonly asked questions about Junior ISAs to provide more clarity on the saving method: 

1. How do Junior ISAs Work? 

Opening a Junior Cash ISA works similarly to a Building Society savings account. However, in this case, the money is locked in and cannot be withdrawn until the child turns 18. 

Unlike Building Society savings accounts, account holders can enjoy a range of tax advantages that could help them build their wealth more effectively. 

When it comes to opening a JISA, a child’s parent or legal guardian must open the account on their behalf. Additionally, parents, friends, and family can all contribute savings to the account, provided that the total paid remains under the annual limit. 

1. What’s the Difference Between a JISA and a Child Trust Fund?

Both a Junior ISA and Child Trust Fund (CTF) serve as government-introduced savings initiatives focused on children. 

Child Trust Funds were made available to children born between 1st September 2002 and 2nd January 2011, with the latter being the year that JISAs were introduced. 

Unlike Junior ISAs, Child Trust Funds received a monetary voucher. Contribution years also mean a lot between the two savings strategies. While JISAs operate between tax years for the contribution periods, CTFs focus on the year between the child’s birthdays. 

However, both JISAs and CTFs have the same annual contribution allowance. 

1. What is the Junior ISA Annual Allowance? 

For the 2024/2025 tax year, the Junior ISA allowance is £9,000. The deadline to add money each year is midnight on April 5th. 

This allowance applies to both Cash Junior ISAs and Stocks and Shares Junior ISAs. This means that if your child has £5,000 paid into their Cash ISA, only £4,000 can be paid into their Stocks and Shares ISA. 

1. Do I Pay Any Tax on a JISA?

No. You do not have to pay any tax on your child’s Junior ISA. This applies to capital gains tax, income tax, and dividend tax. 

1. What Happens When My Child Turns 18?

When your child reaches 18 years of age, their Junior ISA will automatically mature into an adult ISA. The money you’ve invested will remain in the same fund until your child decides to move or withdraw it, but it won’t be possible for you to pay any more money. 

As for your child, they will have a number of options for their JISA after they turn 18, including transferring all of their money into a completely different Lifetime or Stocks and Shares ISA, withdrawing some of their savings and reinvesting the rest, or simply closing their account and withdrawing the cash in its entirety. 

1. Is There an Age Limit on Opening a Junior ISA?

To open a Junior ISA, your child needs to be a resident of the United Kingdom aged 17 years or under. Once your child reaches 18 years of age, they’re no longer eligible for a JISA but will be eligible for a more traditional ISA. 

Additionally, your child won’t be eligible for a Junior ISA if they already hold a Child Trust Fund. However, JISAs and CTFs hold many similarities. 

1. What if My Child Lives Outside of the UK?

If your child lives outside of the UK, then they may still be eligible for a Junior ISA. If you’re a Crown servant as their parent and are stationed overseas in the armed forces, on diplomatic service, or in civil service, for instance, your child can still have a JISA. 

Your child may also be eligible for a Junior ISA while living away from the United Kingdom if they’re dependent on your care. 

1. Who can Contribute to a JISA?

The great thing about a Junior ISA is that anyone can contribute, including parents, grandparents, other relatives, and even friends. 

The only limit you’ll face when contributing to a JISA is the £9,000 allowance each tax year, and different providers can offer varied levels of ease in terms of welcoming contributions from other sources. 

1. Can I Make Early Withdrawals? 

No. Junior ISAs are only accessible when the account holder turns 18, so it’s important to consider whether or not these savings could be required at an earlier date before opening an account. 

Sustainable Savings for Your Child

Opening a Junior ISA could be a significant action in securing your child’s future. With major tax benefits and a healthy £9,000 annual allowance, a JISA can provide an effective nest egg to help your child navigate their first steps into adulthood or to build their savings for their first home or education. 

Crucially, JISAs can introduce your child to saving, and help them to live comfortably in the future. With several unignorable benefits, a Junior ISA is likely to be your most sustainable option when saving for your children’s future.