What is a junior Isa?
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 under 18s. Anyone can pay into a junior Isa, up to a maximum of £9,000 in the 2021-22 tax year, unchanged from the previous tax year. There's no personal income or capital gains tax to pay on any growth.
Our short video explains how junior Isas work.
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.
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
How much can I put into a junior Isa?
The junior Isa annual contribution limit for the 2021-22 tax year is £9,000.
It increased substantially from a maximum of £4,368 in the 2019-20 tax year.
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 £20,000 in 2021-22, unchanged from the last tax year.
- Find out more: cash Isa advice guides
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.
After this point, the junior Isa will become a full Isa and the adult limit of £20,000 will apply.
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 (CTF). 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