Opening a Junior ISA (JISA) as soon as your child is born is a fantastic way to save the maximum amount of tax-free money possible and ensure they have a solid financial future.
If you can afford to put money aside for your child, we recommend opening a JISA for them. This will give them access to savings for university, travelling, or their own mortgage when they turn 18.
This article will explore the Junior ISA and how much you can save for your child if you open it when they are born.
What Is A Junior ISA?
Parents or guardians who have been granted parental responsibility can open a JISA if the child is under 18 and lives in the UK. However, anyone, such as grandparents and aunties, can put money into the account. This allows you to save money for your child’s future without being taxed on the interest or capital gains.
The money in the JISA belongs to the child, but they can not take control of the account until they’re 16, and additionally, they cannot withdraw the funds until the day of their 18th birthday.
There are two types of JISA’s, and you can open either one or both for your child. These are:
- Cash Junior ISA: This is similar to a bank or building society savings account, but the money can only be withdrawn once they turn 18. In addition, your child doesn’t have to pay tax on the interest they earn on their savings, and you don’t have to either.
- Stocks and shares Junior ISA: This allows you to put your child’s savings into tax-free investments like funds, shares, and bonds. Investments are riskier than cash but could give your child a more significant profit.
However, It’s important to note that you cannot open a Junior ISA if you already have a Child Trust Fund (CTF). So, if you want to open a Junior ISA, you must ask the provider to transfer the CTF into it. If you choose to do this, the value of the CTF will not count towards your annual JISA allowance.
How Much Can My Child Save?
In the 2024/25 tax year, you can put up to £9,000 in a JISA. This annual allowance has remained the same since the 2020/21 tax year.
However, prior to that, the amount was much lower, starting at just £3,600 when the UK Government first introduced JISAs on the 1st of November 2011, and gradually increasing each tax year to reach the limit we have now. Here are the historical annual allowances for JISA’s:
- £4,000 in 2014/15
- £4,080 in 2015/16
- £4,080 in 2016/17
- £4,128 in 2017/18
- £4,260 in 2018/19
- £4,368 in 2019/20
So, if you’re trying to work out how much you can save for your child when you open a JISA the year they are born, it’s pretty simple. If your child was born in 2021 and you put the total allowance of £9,000 into their JISA each tax year, they will have £162,000 by the time they turn 18 in 2039 – considering the annual allowance stays at £9,000.
However, if your child was born in 2014, they will only have a maximum of £132,910 by the time they turn 18 in 2032 due to the previous lower annual allowances.
Remember that if you place much less into the JISA each tax year, your child will have less savings when they turn 18. For example, £2,000 a tax year will leave them with £36,000.
It’s important to note that the tax year runs from the 6th of April to the following the 5th of April, and the annual allowance cannot be carried over if you do not contribute the full amount in one tax year.
Ready To Open A Junior ISA?
To maximise how much savings your child will be entitled to on their 18th birthday, you should open a Junior ISA in the year that they are born. However, it is entirely up to you when you open the JISA and how much of the annual allowance you invest into it each tax year.
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