Junior ISAs (JISAs) can be a great way to support your child when they reach adulthood. But did you know there are also tax benefits to saving money in a junior ISA?
Read on to find out how those tax benefits work but, keep in mind, tax advantages depend on your individual circumstances and they could change in the future.
How do junior ISAs work?
Junior ISAs (JISAs) are tax-exempt saving or investment accounts for children. They can be opened by the parent or legal guardian of children under 18 (under 16 for a OneFamily Junior ISA) and doesn’t already have a child trust fund.
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. So, there’s no temptation to dip in early!
You can choose to open a cash JISA, where your money grows by earning interest, or a stocks and shares JISA, where your money is invested.
What are the tax benefits of junior ISAs?
Your child won't pay tax when they move the money
No matter how much the money you pay into a junior ISA (JISA) grows, (either by building interest or by being invested in the stock market), they won’t pay any Capital Gains or Income Tax when the money is withdrawn.
Interest or investment returns that are made in accounts that aren't tax-exempt could be subject to tax. Find out if you need to pay tax on your savings in our guide.
You don't pay any further tax when you pay into a junior ISA
You are likely to have already paid Income Tax on the money you choose to save for your child, but there is no extra tax to pay when you put 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 junior ISA allowance doesn’t affect your own £20,000 ISA allowance.
So, even if you reach the limit on your own ISA, you can still put money away in a JISA for your child and continue to build tax-exempt savings.
Your child's junior ISA could help reduce inheritance tax
If you’d like to leave your child or grandchild some money for when you’re no longer around, paying some money into a junior ISA might mean that it's not subject to inheritance tax. Find out more in our junior ISAs and inheritance tax guide.
What happens when a junior ISA matures?
Your child can take control of their JISA at age 16 by creating their own online account, but they'll 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, but 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.
What would you like to do next?
Find out more about junior ISAs
Our guides contain everything you need to know to about investing for your child's future in a junior ISA.
Transfer to OneFamily
Transferring a child trust fund or junior ISA from another provider to OneFamily is simple and we don't charge you to do so.
Open a OneFamily Junior ISA
Give your child more options when they reach 18 with our straightforward Junior ISA. Simply choose one of our three climate-focused funds to start investing on their behalf.
Our Junior ISA invests in stocks and shares. The value is therefore likely to go up and down over time.
This is normal for this type on investment, but it means there is a risk your child could get back less than has been paid in if they withdraw at a time when the value is lower.
