What are the rules for children's ISAs?
In terms of rules and regulations, ISAs for children are similar to adult ISAs.
- There are both Junior Cash and Junior Stocks and Shares ISAs
- Switching providers is allowed, and is usually free.
- Unlike Child Trust Funds, junior ISAs don't involve any Government contribution.
- A junior cash ISA can be opened by the child's parent or legal guardian.
- Once the child reaches 16, they'll be able to manage their own account. However, they won't be able to withdraw funds until they reach the age of 18.
- Any child who already has a child trust fund is ineligible for a children's ISA.
- Family, friends and grandparents can all contribute to the ISA account (within the annual limit), making a junior ISA a good way to save for a child's future.
How much cash can I put into a children's ISA?
The annual deposit limits on children's ISAs are different from standard adult ISAs, and changes each tax year check the current limit here:
There are several options available when it comes to deciding how to use this allowance - the money can either be put into a junior cash ISA in its entirety, or it can divided between a junior stocks and shares ISA and a junior cash ISA, in whatever proportion you wish.
Points to consider when choosing a children's ISA
- Most children are able to earn tax-free interest with any savings plan, not just a junior ISA, as long as the parent opening it on their behalf fills out an R85 form when setting up the account. However, if you are in a position to contribute funds to your child's ISA that generate over £100 per year in interest, a junior ISA can help you avoid paying tax on this.
- Once your child reaches 18, the money is theirs to spend however they choose. If you're concerned about money being wasted on non-essential items, you might want to save for your child's future in your own name, instead.
- The money is locked up until your child turns 18, so think carefully about whether you can afford to leave cash untouched for this period of time, and only save an amount that you're able to afford.