Junior ISAs

Junior ISAs explained

What is a Junior ISA?

A Junior ISA (JISA) is a tax-free savings account for children under the age of 18, introduced by the UK Government in 2011 as a replacement for the Child Trust Fund (CTF). With the annual limit allowing you to save or invest up to £9,000 per year, Junior ISAs are designed to offer a tax-free savings pot that cannot be accessed until the child turns 18.

Key features of a Junior ISA

• You can make an annual contribution of up to £9,000 into your child’s account.
• Contributions can be made by anyone, so long as the total amount paid in doesn’t exceed the £9,000 annual limit
• All interest is earned free from tax.
• The child cannot access the funds until they turn 18, though they can take control of the account at 16.
• Parents or guardians will manage the account until the child takes over.

Types of Junior ISAs: Cash vs. Stocks and Shares ISAs

Junior ISAs are available in two different forms: a cash JISA and stocks and shares JISA. A cash JISA works in much the same way as any other type of cash ISA, with providers paying tax-free interest on balances held in the account. Rates are typically variable, though the term is always fixed until the child turns 18, and they won’t be able to access the funds until then.

Meanwhile, a stocks and shares JISA is a means of investing in the stock market on behalf of a child. Although this offers the possibility of greater returns, it’s important to remember that the value of the investment could fall and returns aren’t guaranteed. The child still won’t be able to access the funds until they’re 18.

What is the Junior ISA allowance?

Like all ISAs, there’s an annual allowance to bear in mind. This is the maximum amount that can be deposited into JISAs annually, with the current JISA allowance standing at £9,000 per tax-year. Note that this is entirely separate to an adult’s allowance, which means adults can contribute to a JISA without using up any of their own £20,000 annual limit.

What happens if I exceed the JISA limit?

Exceeding the £9,000 JISA limit means contributions above this level will lose their tax-free status. Tax may become payable and you’ll need to withdraw the excess funds, though HMRC or the provider will contact you to discuss how to do that.

How do you open a Junior ISA?

Parents and guardians can open a Junior ISA for a child under the age of 16, while children aged 16 to 17 are able to open their own account (though they still won’t have access to any funds until they’re 18). To start the process you can compare Junior ISAs using our chart, and from there can apply directly with the provider. We outline the steps below.

Compare Junior ISA providers

To find the best Junior ISA, compare providers to find the best rate and/or most suitable account, making sure to research different banks and building societies to find the one that works for you. A few things to look out for include:

• How much interest is paid. During your Junior ISA comparison, the rate will arguably be the most important factor to consider as this will determine how much interest is earned, and, over the course of 18 years, even a small difference in rate could have a huge impact on the eventual savings pot. At the time of writing, the best JISA rates exceed 3.80% AER, though note that some options have tiered rates depending on the amount you invest, so be sure to check. Bear in mind too that fixed rates are uncommon for this type of ISA, which typically offers variable returns that can change at any time, so it’s important to keep up to date in order to find the best Junior ISA rates.
• Minimum deposit requirements. Most JISAs will have small deposit requirements of £1 or £10, but some will ask for more at the outset. From there you’ll normally be able to deposit additional amounts whenever you wish, but remember, the maximum amount that can be deposited in any tax year is £9,000.
• Opening restrictions. While some JISAs will be open to all, others will have opening restrictions, such as they’ll only be available to local residents (often the case with building society accounts) or existing customers of the provider. Always read the terms and conditions to ensure that you and your child are eligible.
• Transfer penalties. Make sure to check if there are any penalties for transferring the ISA to another provider, as this could eat into any interest earned.
• Account opening methods. Some JISAs offer the option of applying online, though most will ask you to apply in branch, by phone or by post, particularly in the case of building societies. Our charts list all the opening methods next to an account so you can find the one most suitable, or alternatively you can filter accounts by opening method by selecting ‘full search’.
• Account management options. It’s important to consider how you can manage the account, and in particular how you’ll be able to make contributions.
• Fees/charges. Fees shouldn’t be an issue for cash JISAs, but they’ll need to be considered if you’re opting for a stocks and shares version. These can vary wildly between provider and can include annual management charges, transaction charges and platform fees, so always factor these into your equations. You can find out more on our stocks and shares ISA page.

The best Junior cash ISA for you will be determined by all of these factors combined, so it’s important to spend time researching the market so you can be confident you’ve got the right deal.

Applying for a Junior ISA

After identifying an account you wish to open, simply apply with the provider. You’ll need to fill in an application form, much like you would for any other savings account, but remember that as the Junior ISA will be held in your child’s name, you’ll need to provide proof of identity for them as well as yourself, as the ‘registered contact’ for the account. Documents you may need to provide include:

• the child's birth certificate, passport or a similar document to prove their identity
• proof of your own identity, such as your photocard driving licence, passport or residence permit
• proof of address, such as a utility bill or credit card statement
• your National Insurance number (and your child’s if applicable)
• bank account and/or debit card details for transaction purposes.

Who can open a Junior ISA?

Only the parents or legal guardians of the child can open a JISA on their behalf, though other friends and family members can contribute once it’s open.

Can grandparents open a Junior ISA?

A grandparent can only open a Junior ISA for their grandchild if they are their legal guardian. Otherwise, grandparents can contribute to their grandchild’s Junior ISA but cannot open an account on their behalf. Bear in mind that any contributions grandparents make to the JISA counts towards the child’s overall ISA allowance, so it’s important that the person managing the account keeps track of the total amount invested to avoid breaching the tax-free limit.

Another option grandparents may want to consider is setting up a separate savings account for their grandchild. Anyone is able to open a child’s savings account, provided they can provide necessary ID, and will typically become the adult trustee until the child turns 18. However, grandparents should be particularly mindful of the potential tax implications of financial gifting.

How to manage a Junior ISA

Once the children’s ISA is set up, you can manage the account on behalf of the child. This can include making contributions, either ad-hoc or more regularly. You’ll typically be able to contribute via bank transfer, cash or cheque, or by transferring funds from another JISA (note that you cannot transfer money from an adult ISA to an under-18 ISA) or child trust fund. For more regular contributions you could set up a monthly direct debit or standing order, and you can amend the amount whenever you need.

It’s important to stay on top of junior cash ISA rates as well, and you may want to transfer to another provider if you spot a better deal. In the case of stocks and shares JISAs, you may be able to change the funds the ISA is invested in, allowing you to have more control over potential returns. You’ll also need to report any change in circumstances to the provider, particularly if you want to change the registered contact, or if any names or addresses need to be updated.

Once the child turns 16 you can hand over the reins and they can become the registered contact. You’ll need to contact the provider to make the arrangements.

What happens to a Junior ISA at 18?

Once a child turns 18, their JISA will automatically become an adult ISA and they’ll have access to any savings in the account. At this point, should they wish to continue holding their funds in an ISA, they may want to shop around for a more favourable interest rate. Use our ISA hub to compare the best rates.

What are the disadvantages of a Junior ISA?

One of the main disadvantages of a JISA is that the rates are typically lower compared to other child savings options. This means the impact of inflation could be even greater over an 18-year period, and could reduce the purchasing power of the funds.

There’s also the annual contribution limit, and the fact that there are limited JISAs available. Of those that are on offer, many are through building societies with restricted opening methods, which narrows the pool of options further.

The lack of parental control once the child turns 18 could also be a drawback for some, as they’ll be free to spend it however they wish – which in some cases could be problematic. There’s also the fact that the money is completely locked away throughout childhood, with no option for withdrawals.

However, for many parents the lack of access is also the main advantage, as it means their child could have a healthy nest egg by the time they reach adulthood. This is particularly true for those who start saving early, and even more so if they opt for a stocks and shares JISA, where there’s the potential for even greater returns (though remember that investments can go down as well as up and you could end up with less than you put in).

Are there any alternatives to a Junior ISA?

If you’re exploring alternative options to help kickstart your child’s savings, it may be worth looking into children’s savings accounts. Like JISAs, these accounts are designed to help build your child’s savings (and often pay higher returns), however, the key difference is that they allow withdrawals, offering greater flexibility should your child need to quickly access their cash.

For this reason, these accounts can be used for different purposes. As a JISA locks away any deposits, you may wish to use them for long-term savings for your child, while a children’s savings account could be used to develop their savings habits day-to-day by letting them save and spend their funds. Find out more about the best ways to save for your child’s future in our guide.

Junior ISAs vs. Children’s savings accounts