The toys on the most-wanted Christmas year are the usual: Legos and Barbies and cuddly toys dominate the top-ten list. But one gift that fails to make it onto kids’ “Dear Santa” List is a JISA. A Junior ISA is a gift which will keep on giving – gaining interest in the years to come. But what is it – and how do you get one? Our elves have put together a quick blog to let you know all the details.
Very few children will have a JISA at the top of their Christmas list – but we think that they should. A Junior ISA is an excellent tax-efficient way for parents to put money aside to help give your child or children a solid start in life.
While a toy might be the more exciting package to find under the Christmas tree, in a few years it will likely be a long forgotten relic of the terrible twos or threes which is simply gathering dust in the attic. A JISA, while arguably less shiny and visually stimulating, is of far better long-term value and might be a good idea as a gift for a child – be it your own or belonging to a friend or family member.
What is a JISA?
A Junior ISA is an ISA which is set up by the parents or guardian for the child; it’s a type of Stocks and Shares ISA which enables you to put money into your child’s name. This gives your child an established stock-free savings fund in their own name, giving them a leg up into the stock market.
These are investment accounts where the money is invested, and the capital gains made on returns from the investments are tax-free, because these are kept within the tax-free ISA wrapper.
This way, your child’s JISA savings have access to a wider range of investment types, such as equity funds and investment trusts.
Great, so what do I need to know?
If you want a JISA for your child, there are some key factors you need to know before you start researching providers.
Some key rules include:
- You can open a Junior Investment ISA if your child is under 18 and a resident in the UK.
- Only a parent or guardian can open an account for a child.
- Anyone can put money into the account – grandparents, friends, cousins alike.
- You can open both a Junior Stocks and Shares ISA and a Junior Cash ISA for your child – but if you are putting money into both, you need to keep this amount below the annual limit.
- Your child won’t have access to the money until they are 16. At this point, they’ll be able to manage the funds, and they’ll be able to withdraw the funds/sell the investments when they are 18.
How do I open a Stocks and Shares JISA?
- You can chose to open a JISA in your child’s name – the account can only be opened by a parent or guardian. The majority of JISAs can be opened with a deposit of only £1, so getting started with this form of saving is very easy. Some providers enable you to open your account online, so this will minimise fuss.
- How much can I invest?
- Like all ISAs, there is a cap on how much you can put into this account which is applied each tax year.
- For tax year 2020/2021, you can invest up to £9,000 into any Junior ISA account.
Will it cost me anything?
If you are thinking of opening a Junior Investment ISA for you child, you need to be aware of any costs you might incur as these might decrease the returns you can expect from your child’s account.
- Although the fees charged will vary from provider to provider, the majority will charge the following:
- Transfer charges
- Dividend investment fees
- Buying charges
- Selling charges
- Fund switch charges
- Bid/offer spread
- Fund managers charges
- Platform charges
- Transfer out fee