What is a Junior ISA?

If you are a parent or a legal guardian, you may want to think about your child’s financial future. A Junior ISA is one possible option. Let’s take a look at what a Junior ISA is and how it works.

What is a Junior ISA?

A Junior Individual Savings Accounts (also known as Junior ISAs or a JISA) is a long-term tax-free savings account set up by a parent or legal guardian on behalf of a child. This type of ISA account is managed by an ISA provider.

How does a Junior ISA work?

Only a parent or legal guardian can open the account for the child. Any money put in the account belongs to the child, but they cannot withdraw it until they are 18. They can manage the account once they are 16.

Once the child turns 18, the account becomes an adult ISA. It will therefore maintain its tax-free status until the money is withdrawn.

How much can you put into a JISA each year?

The Junior ISA limit for the tax year 2021/22 is £9,000. Any interest or investment gain by the savings in the account is tax-free.

Note that this is a combined limit, so if your child has a Junior Cash ISA and a Junior Stocks and Shares ISA, the £9,000 maximum covers both accounts (so you could put £4,000 in one and £5,000 on the other).

Anyone can put money into a Junior ISA, so it can be funded by grandparents and other family members in addition to a child’s parents.

Who can have a Junior ISA?

A child can have one provided they fulfill the following criteria:

  • They are under 18
  • They live in the UK

Some children living outside of the UK can get this type of account, but they must fulfill the following criteria:

  • Their parent has to be a Crown servant (e.g. in the armed forces, diplomatic service, or overseas civil service)
  • The child is dependent on that parent

What are the different types of JISAs?

There are two different types of Junior ISAs:

  • Junior Cash ISA
  • Junior Stocks and Shares ISA

You can open either type of account, or you can open both. But the total amount you can save tax-free remains £9,000 in the current tax year, irrespective of how many accounts the child has.

Should you get a cash JISA or a stocks and shares JISA?

This a personal choice however, generally speaking, you would expect the long-term returns from a cash JISA to be lower but less volatile.

How soon can a child open an adult ISA?

Once a child is 16, they can open an adult Cash ISA and a Junior ISA in the same tax year.

Therefore a 16-year-old could save up to £29,000 in the following accounts:

  • Up to £20,000 in a Cash ISA
  • Up to £9,000 in a Junior Cash ISA, Junior Stocks and Shares ISA, or a combination of the two.

Can I have a Junior ISA and a Child Trust Fund?

No, you cannot, because the Junior ISA was introduced as a replacement for Child Trust Fund. However, as of April 2015, anyone with a Child Trust Fund can transfer their account to a Junior ISA.

Where can I get a Junior ISA?

They are available from a wide range of banks, building societies, credit unions, friendly societies and stockbrokers.

To open an account, you will need proof that you are the child’s parent or legal guardian, and some official proof of identification for the child. This could be a birth certificate or a passport.

Are Junior ISAs worth it?

There is no definitive answer because it depends on your individual circumstances. However, there are some things that you should think about before opening a Junior ISA:

The child cannot access the money until they turn 18

If you do open a Junior ISA, make sure you won’t need the money for anything else that your child might require in the meantime.

Only the child can access the account

Having access to a large lump sum at such a young age might not be the best idea. If you have any reservations at all, then opening a different type of savings account in your name might be a solution.

Junior Stocks and Shares ISAs can lose money

Investment in the stock market is a risk, and the value of your investment can go down as well as up. But if you’re looking for a long-term way to save money, it could be a good option.

To learn more about the benefit of stocks and shares ISAs, check out our list of featured stocks and shares ISAs in the UK.

Frequently Asked Questions

This is a personal choice but many people like to use Junior ISAs to help teach their children about money and the long-term benefits of investing in shares.

Yes, just like with an adult ISA, you can switch Junior ISA providers if you think you can get a better deal. 

As always, check the small print (or ask directly) to see if moving would incur any extra charges (such as the loss of some interest on a fixed-term savings product).

When your child turns 16 they can become the registered contact for their Junior ISA and decide what happens within the account. They can’t yet access the money though.

However, at age 16 they can also open an adult cash ISA. So, for a few years, your child effectively has a £9,000 JISA allowance plus a £20,000 adult cash ISA allowance.

On their 18th birthday, the JISA automatically converts into an adult ISA (either a cash ISA or a stocks and shares ISA). So whatever has been built up so far can continue to be protected from tax for as long as it remains within the ISA. That can be very valuable. 

However, your child is also able to access the money to do with as they wish. So you need to be happy with this fact if you are putting any money into a Junior ISA as even small amounts could grow into a substantial sum over the course of 18 years.