ThinkIFA guide to the ‘Child ISA’

Junior ISAs from thinkifa.comThe Junior ISA (also known as a Children’s / Child ISA) is a tax efficient Individual Savings Account available to children under the age of 18 who don’t already have a Child Trust Fund.

Like the adult version, Child ISAs allow children to save a certain amount each year tax-free.

The idea behind it is to encourage parents to save on behalf of their children so that they have a nest egg for when they are older.

This can be used to help with University fees, a deposit on a house or can be rolled into an adult ISA to keep gaining tax-free interest until they need it.
Junior ISA Comparison

Important Update

The government has announced that from April 2015, Parents who hold a Child Trust Fund will be permitted to transfer it to a new Junior ISATransfer Child Trust Fund to Junior ISA

Difference Between a Children’s ISA and Child Trust Funds

Child Trust Funds enabled parents to save with the help from government contributions. The funds didn’t give any access to the money until the child reached 18 when the money becomes legally theirs to spend how they wish.

Junior ISAs are set up by parents without any government contribution and the child cannot access the funds until they turn 18. You cannot set up a Baby ISA for a child who already has a Child Trust Fund however but you can still pay into a Trust Fund for that child.

Does my Child Need a Junior ISA?

This is the big question as some parents would argue that children don’t pay tax anyway, but this is not strictly true.

Whilst the majority of kids aren’t earning an income and certainly not anywhere near the minimum tax threshold, they can still be taxed on money given to them by either parent if it generates more than £100 a year in interest per parent.

This is intended to stop parents using junior savings accounts to stash their own savings tax-free. However there is no cap on the amount that friends or relatives can gift children.

Junior Cash ISAs and Stocks and Shares Junior ISAs

Anyone can pay into a JISA account but the total amount must not exceed the annual allowance. You can divide this amount between a Junior Cash ISA or a Junior Stocks and Shares ISA and can put all or some of the annual allowance into either.

Childrens Share ISAs work on the same principle as the adults. The ISA has the potential to grow rapidly but it can also fail so there is an element of risk involved.
Junior ISA Comparison
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