Best rate Junior cash Isas
The investment limit for 2018-19 is £4,260. In 2019-20, this will increase to £4,368.
Our table outlines the best Junior cash Isas that are currently available, or you can skip to the advice below.
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Rates correct at February 2019.
What is a Junior Isa?
A Junior Isa is a child’s version of a tax-free individual savings account (Isa), designed to encourage long-term saving.
Parents, grandparents and friends can put money into a Junior Isa each year, up to a limit of £4,260 in 2018-19, and £4,368 in 2019-20.
As with standard Isas, the money can be invested in cash or stocks and shares, or a mix of the two.
You can only hold one of each type at any one time – one cash Junior Isa and one stocks and shares Junior Isa – but you can switch to a new provider as often as you like.
Who can open a Junior Isa?
Parents and legal guardians can open and manage a Junior Isa for any child under 18.
Parents living abroad can still open an account if they are a Crown servant (e.g. in the UK’s armed forces, diplomatic service or overseas civil service).
Anyone can pay into a Junior Isa (including parents, grandparents and friends) and these are widely available from banks, building societies, credit unions, and stock brokers.
Who does the money belong to?
The parent is responsible for managing the Junior Isa, although the child can take control of the account when they’re 16.
No withdrawals are allowed until they turn 18.
You can’t legally stop your child from spending the money in any way they choose – so bear this in mind when deciding whether to use a Junior Isa, or to save under your own name.
Should I open a Junior Isa for my child?
Like adults, children have their own tax-free allowances.
During 2018-19, both adults and children will only pay tax if their income exceeds £17,850 – made up of the £11,850 personal allowance, £5,000 starting rate for savings and the £1,000 personal savings allowance. See our guide to tax on children's savings for further details.
In 2019-20, the personal allowance will increase to £12,500, which means that children will only pay tax if their income exceeds £18,500.
Realistically, most children will never exceed this, so it makes sense to prioritise the best rates, and these may well be found in non-Isa accounts.
That said, there are some important benefits to saving in a Junior Isa:
- The money is locked away until they turn 18 – although they are free to spend this on anything they like.
- Junior Isas pay interest and investment returns tax-free – money given by parents that generates more than £100 interest in a year is taxable outside of an Isa.
- There’s a loophole for 16 and 17-year-olds – children can open an adult cash Isa as well as a Junior Isa at age 16, taking advantage of two allowances (but they can only open an adult stocks and shares Isa at 18).
- Junior Isas remain tax-free forever – at 18, the account automatically turns into a normal adult Isa.
What about child trust fund (CTFs)?
Previously, the government gave children at least £250 to open a child trust fund (CTF).
The government automatically opened CTFs for anyone born between 1 September 2002 and 2 January 2011.
Junior Isas replaced CTFs in January 2011.
You can’t have a CTF and a Junior Isa at the same time. But, since April 2015, you can transfer CTF savings to a Junior Isa.
What are the alternatives?
If you’ve used up your child’s tax-free options or you want to access the money before they turn 18, banks and building societies also offer non-Isa savings accounts for children.
Children can open most of these accounts themselves from age seven, so it’s a great way to get them involved.
Watch out for catches such as introductory bonuses, limits on withdrawals, maximum or minimum account balances, and investment charges (if you opt for a stocks and shares Junior Isa).
Providers often offer free gifts such as a piggy bank but don’t be distracted – focus on getting the best return – and check on the progress at least twice a year.
If cash savings are no longer competitive, transfer them to a better account. If stock market investments are underperforming, consider moving.