What you need to know about Junior ISAs
Junior Individual Savings Accounts (ISAs) are long term, tax-free savings accounts for children. They are a popular way to build up tax-efficient savings for your child’s future – it can provide a deposit for a house, University funding or to simply give them a great start to their adult life.
You may have been aware of the Child Trust Fund (CTF) scheme, which existed before the Junior ISA. The CTF scheme has now closed to new applicants and you are now able to apply for a Junior ISA instead.
If you already have a CTF you can continue to add up to £4,000 a year to the account. From April 2015, you will be able to transfer the money to a Junior ISA.
Who is eligible for a Junior ISA?
Your child can have a Junior ISA if they:
- Are under 18
- Live in the UK
- Do not already have a Child Trust Fund
What are the options?
There are 2 types of Junior ISA:
- A cash Junior ISA (where you won’t pay tax on interest on the cash you save)
- A stocks and shares Junior ISA (where your cash is invested and you won’t pay tax on any capital growth or dividends you receive)
The child can have one or both type of Junior ISA, but only one of each.
How much can I save into a Junior ISA per year?
The Junior ISA allowance for the 2014/15 tax year is £4,000.
Say, for example, you paid £2,000 into the child’s cash Junior ISA from 6 April 2014 to 5 April 2015, then only £2,000 could be paid into their stocks and shares Junior ISA in the same year.
You can transfer money between your child’s Junior ISAs but you can’t transfer money between a Junior ISA and an adult ISA or a Junior ISA and a CTF account.
Who is in control of the account?
The child’s Junior ISA will be in their name, but the parent or guardian who opens it is responsible for managing the account and is known as the ‘registered contact’. This person can change the account, change the account provider and report changes of circumstance, e.g. change of address.
The child can take control of the account when they’re 16 and become the registered contact for the Junior ISA, but they can’t withdraw the money until they turn 18. Their Junior ISA will automatically turn into an adult ISA when they turn 18.
For more information regarding Child Trust Funds or Junior ISAs please contact Geoff Cavanagh on 0191 285 0321 or email firstname.lastname@example.org
This blog represents our interpretation of current and proposed legislation and HMRC practice as at the date of publication. These may be subject to change in future. Tait Walker Wealth Management is a trading name of Tait Walker Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.