Junior ISAs explained
What is a Junior ISA?
A Junior ISA is a long-term savings account set up by a parent or guardian with a Junior ISA provider, specifically to build a nest egg for their child's future and which benefits from a number of tax advantages. Junior ISAs may be held in cash and stocks and shares and are available to children born in the UK.
A Junior ISA is held in the child's name but is managed by a parent or legal guardian until the child is 18. To offer a Junior ISA, the provider, such as Beanstalk, must be approved by HMRC (the UK tax authority).
What are the advantages of a Junior ISA?
The features of a Junior ISA make it an attractive option for putting money aside for a child.
It is tax-free. Any interest or investment income is usually tax free and there is no capital gains tax to be paid on increases in value of any investment.
The money belongs to the child and it is locked up until the child is 18.
Anyone can pay money in. Unlike Beanstalk not all providers make this easy but once opened, friends and family can also pay money in.
It turns into an ISA at 18. At 18, the Junior ISA automatically turns into an adult ISA in their name which means they don't need to take the money out straight away.
What is the Junior ISA limit?
There is a limit on total contributions that can be made into a Junior ISA in any individual tax year. The limit for 2021/2022 is £9,000 and was £9,000 in 2020/2021. This was a significant increase from 2019/2020 when it was £4,368.
What is a cash Junior ISA?
Cash Junior ISAs are like a regular bank savings account in that they typically pay a fixed rate of interest (which may vary from time to time) on any savings.
What is a stocks & shares Junior ISA?
A stocks & shares JISA allows you to put money into a range of different investments such as company shares, investment funds and government bonds depending on what the provider offers. The growth in your savings depends on how well the investments do and there is a risk that you could end up with less than you put in.
Some people choose stocks & shares when saving over longer periods as growth may compensate for the extra risk of the ups and downs. A recent Barclays report, for example, showed that over 50 years, UK shares returned four times more than cash.
How many Junior ISAs can a child have?
A child is only allowed to hold one of each type of Junior ISA . You are able to transfer between providers so if you want to open an account of the same type with a new provider, you must transfer the old Junior ISA across.
Transfer a Child Trust Fund to a Junior ISA
If your child already has a Child Trust Fund, then they will need to transfer it to open either type of Junior ISA.
Transferring is really simple: when you apply for a Beanstalk account, we will ask you if you have an existing account to transfer. We need a few details from you and then we take care of the rest.
Our switch-and-save switch calculator will show if you could save money in fees by transferring.
Free Junior ISA Guide
Download our free Junior ISA Guide to learn more about the basics of Junior ISAs.