Junior and Children’s ISAs

What is a Junior ISA?

A Junior ISA is a way to give your child a nice nest egg to spend or save when they reach 18.

It’s a type of tax-free savings or investment account that you can open in your child’s name and save into on their behalf.

Any cash in the account belongs to the child. But they’re not allowed to take money out of it until they turn 18, except in exceptional circumstances.

You can’t have a Junior ISA as well as a Child Trust Fund (CTF). Anyone with money in a CTF can transfer it to a Junior ISA.

How does a Junior ISA work?

Any child under the age of 18 who lives in the UK can have a Junior ISA. The account can be opened by the child’s parent or legal guardian.

Once they turn 16, your child can start to manage their account themselves, but they can't get their hands on the money for another two years.

There’s a limit to how much you can pay into a Junior ISA each year. For the tax year 2021/22, the allowance is £9,000. Interest or investment gains aren’t taxed, so even if you can only afford to put away a small amount each month, you can create a sizeable nest egg for your child by the time they turn 18.

What types of Junior ISA are available?

There are two types of Junior ISA – a Junior cash ISA and a Junior stocks and shares ISA.

  • Junior cash ISAs earn interest in the same way as regular savings accounts. Interest rates tend to be higher on children’s ISAs than adult ones. Neither you nor your child will have to pay tax on the interest earned.
  • Junior stocks and shares ISAs invest money in the stock market through funds, bonds and individual shares. There’s no tax to pay on any profits or dividends. Although investments are riskier than cash savings, shares typically do better than cash savings over the long term. This means they can potentially add up to more for your child. Always remember, though, that the value of investments can go down as well as up.

You can save into one or both types of Junior ISA for your child, but the total paid in mustn’t be more than the limit set by the Government for the tax year.

Can you transfer a Junior ISA?

If you want to get a better interest rate, you can switch the Junior ISA to another provider whenever you like. You can also switch between the two types of Junior ISA. A child can only have one Junior cash ISA and one Junior stocks and shares ISA at any one time though.

Get your new provider to handle the transfer process to make sure the ISA doesn’t lose its tax-free benefits.

If you already pay into a Child Trust Fund, you can transfer it to a Junior ISA if you want to.

Frequently asked questions

Who can add money to a Junior ISA?

Only parents or legal guardians can open a Junior ISA, but anyone can contribute. That means grandparents, other family members or even friends can all add to the pot, as long as the total amount paid in stays under the annual limit.

What happens when my child turns 18?

Once your son or daughter turns 18, the Junior ISA account is automatically rolled over into a standard adult ISA. Your daughter or son can carry on saving for the future or spend the money how they like – buying a new car perhaps, or using it for uni costs or for going travelling. Or they could put some of the money into a Lifetime ISA, which can help them save for their first home. But the important thing to remember about a Junior ISA is that you don’t have any control over what they do with the money you’ve saved for them.

Should I save or invest?

This really depends on how old your child is and your attitude to risk. Investments typically do better than cash savings over the long term, so they can be a good option if you start when your child is young. But with the stock market there are no guarantees that the value of your child’s savings will go up. If your child is close to their 18th birthday, a Junior cash ISA could be safer.

Should I open a children’s savings account instead?

Junior ISAs aren’t suitable for everyone. Some parents want more control over how their children’s money is spent, while the personal tax allowance means Junior ISAs no longer have a tax advantage for most savers.

Regular children’s savings accounts allow your child to make withdrawals before they reach 18 and can get them used to managing money when they’re young. They might pay a higher rate of interest than with Junior ISAs, but it’s always worth comparing to see which will pay most.

How do you find the best Junior ISA rate?

To make sure your money is working hard for your child, it’s worth regularly comparing Junior cash ISA rates. Compare the Market doesn’t currently offer comparisons for kids’ bank accounts including Junior ISAs, but we do compare cash ISAs for those aged 16 and over.

What do I need to compare Junior ISA rates?

At Compare the Market, we don’t offer child cash ISA comparisons specifically. But we do compare cash ISAs that can be opened from the age of 16. You don’t need anything to compare ISA rates, but you will need some basic personal details if you decide to apply, including:

  • your National Insurance number
  • your address
  • your occupation
  • any current ISA account details you want to switch into a new ISA

Savings and cash ISA providers

We compare cash ISAs from a range of banks and building societies, so you can find the one that’s right for you.

Anelda Knoesen

from the Money team

What our expert says

“You want to give your child the best start in life, and Junior ISAs are a great way to save for their future, whether through cash or stocks and shares – or a combination of both. And the good thing is, they can’t be accessed until your child turns 18, so there’s no temptation to take the money out early or spend it yourself.

“That being said, your child can do whatever they want with the cash when they turn 18 – so you have to hope you’ve raised them responsibly!”

Why use Compare the Market?

We compare savings accounts and cash ISAs from leading providers Compare savings accounts in under 1 minute** 93.8% of users would recommend Compare the Market to friends or family***

**On average it can take less than 1 minute to complete a savings account comparison through Compare the Market based on data in November 2020.

***For the period 1st September to 30th November 2020, 12,477 people responded to the recommend question. 11,706 responded with a score of 6 or above, therefore 93.8% are likely to recommend.