Children's savings accounts: Junior Isas explained

pink piggy bank and coins

All interest earned from savings in a Junior Isa is tax-free

If you want to find a tax-free way to build a nest-egg for your children, a Junior Isa is the account for you.

Junior Isas are tax-free savings accounts for children under the age of 18. They can be opened by the parents or guardians of children born on or after 3 January 2011, or before 31 August 2002.

This guide explains how Junior Isas work, and how to make the most of these tax-free accounts. 

What are the different types of Junior Isa?

Junior Isas are incredibly similar to adult Isas. There are two types of Junior Isa:

Junior cash Isas

These work in exactly the same way as a cash Isa from a bank or building society. Any money paid into a Junior Isa will earn interest without any tax deducted from them.

Which? Money Compare: Junior cash Isas - search our comparison tables

Junior stocks and shares Isas

These work in the same way as adult stocks and shares Isas. You can invest your children's money in funds, shares, investment trusts, corporate bonds and gilts.

These types of investments come with the risk of losses - the value of your children's savings can go down as well as up.

Find out more: Stocks and shares Isas explained - all you need to know about this product

How much can I put into a Junior Isa?

The Junior Isa annual contribution limit for the 2016/17 tax year is £4,080. Although parents have to open a Junior Isa on behalf of their kids, anyone can contribute to a Junior Isa account. 

You can save into any mix of cash or stocks and shares, and switch between the two as often as you like. 

Children aged 16 and 17 can also open a cash Isa. This means that during these years, they can contribute even more to a tax free account. This is currently £15,240 for the 2016/17 tax year.

When will my child get access to the money?

Any money placed into a Junior Isa will not be able to be accessed until the child turns 18 years old.  

After this point, the Junior Isa will become a full Isa and the adult limits, currently £15,240 for the 2016/17 tax year, will apply. From 6 April 2017, the Isa allowance will be increased to £20,000 per tax year.

How many Junior Isa accounts can I open?

With adult Isas, it's possible to have multiple Isa accounts from different tax years, and partially transfer savings from previous years. But it's different with Junior Isas. 

You're only allowed to have one Junior cash Isa and one Junior stocks and shares Isa.

So, say you've saved £6,000 over the past three years in a Junior cash Isa. You've found another account that pays a better rate of interest, and want to put this year's Junior Isa allowance into it. 

You'll have to transfer the £6,000 you've already saved up into the new account you've opened. 

Does the government pay money into Junior Isas?

Junior Isas have replaced child trust funds. The government used to put £500 into these accounts when you opened them.

However, you get no contribution from the government in Junior Isas. 

Child trust funds have frustrated many parents by paying poor interest rates on levying high investment charges. The good news is that you're now able to transfer your savings from a child trust fund to a Junior Isa to find a better deal

Find out more: How to switch from child trust funds to Junior Isas - see our step-by-step guide

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