Junior ISAs – what you need to know
On the 26th October 2010 the Government announced that it would introduce new tax advantaged accounts for children to be known as Junior ISAs.
HM Treasury – their aim
Following the ending of the eligibility for Child Trust Funds (CTFs) on 3rd January 2011, Junior ISAs aim to:
- Provide families with simple, transparent, accessible and competitive product to save for children who do not have a CTF; and
- Create the conditions for families to save more for their children than they would otherwise would.
What are Junior ISAs about?:
- Available from 1st November 2011.
- Both cash and stocks and shares ISAs will be available.
- Junior ISAs are tax advantaged for both the child holding the account and their parents.
- All UK resident children (aged under 18) who were not eligible for a CTF would be eligible for a Junior ISA. This includes children born before the start of CTF eligibility in September 2002.
- Children will be entitled to hold one cash and one stocks and shares Junior ISA.
- It will be possible to transfer accounts between providers but not hold more than one cash and one stocks and shares Junior ISA at any time.
- Anyone with parental responsibility for an eligible child would be able to open a junior ISA for that child.
- Eligible children over 16 would be able to open Junior ISAs for themselves.
- Until age 16 their Junior ISA account(s) will be managed by a person with parental responsibility.
- At 16 the child would assume management responsibility for their Junior ISA account(s).
- It is not possible to transfer CTFs into Junior ISAs or vice versa.
- The total contributions into Junior ISA(s) is £3,600.
- Withdrawals from Junior ISAs will not be permitted until the child reaches 18, except in cases of terminal illness or death of the account holder.
- When the account holder turns 18 their Junior ISA becomes an ‘adult’ ISA(s), the funds will then become accessible to the account holder.
The good news:
- Tax efficient – Junior ISAs are tax efficient so that growth in a stocks and shares Junior ISA will not be subject to capital gains tax or subject to income tax. Similarly cash Junior ISAs will received interest gross there is no income tax liability.
The bad news:
- No access – Ordinarily, once money is invested it cannot be accessed until the child is 18.