What are the rules of a Junior ISA

Junior ISAs or JISAs were originally launched in November 2011 to replace Child Trust Funds. JISAs are becoming increasingly more popular for parents and other family members to build up a nest egg for those who are younger and will be faced with high housing and education costs at the outset of adulthood.

Who controls this?

Whilst your child is under the age of 16, you will have full responsibility for the management of the JISA.  From the age of 16, the child can choose whether they want responsibility of the account however they are still unable to withdraw any funds until turning 18.

What are the tax benefits?

Tax-free growth – Any interest earned, dividends or capital gains made within a JISA are completely tax free. meaning that all the money saved within the wrapper can grow without being subject to any income or capital gains tax.

No tax on withdrawals – Once the child turns 18, the JISA automatically converts into a normal ISA. The account holder (previously the child) will gain full control over the funds. At this point, they can withdraw money from the account without incurring any tax liabilities.

No parental income tax liability – The money that you contribute to a JISA is considered a gift to the child, meaning it is treated as their assets. This means that the contributions do not count towards your own annual ISA allowance, nor are they subject to any tax.

Things to remember about JISAs

- Like Adult ISAs, Junior ISAs can invest in either Stocks and Shares or cash. In addition to this you can have two providers in the same tax year, but not two of the same type of ISA.

- Compared to adult ISAs the savings rates are much more favourable on Junior ISAs.

- Neither a parent or child can dip into the JISA.

- Should your child have a Child Trust Fund, you can transfer into this into a JISA, you can not hold them simultaneously.

 

If you feel a Junior ISA could benefit you, then please get in touch.