My First ISA: ISAs for Under-18s

POSTED ON Friday, 20 November, 2020

Every UK resident aged 18 and over has the entitlement to a £20,000 allowance that you can put into a tax-free ISA wrapper every tax year; but what about those under the age of 18? While they can’t open an account themselves, your best option is a Junior ISA. 

What’s an ISA?

An ISA is a fund where you can hold your money with a tax free wrapper, meaning that you won’t pay tax on any returns you make from the interest on these accounts.

  1. You are able to put £20,000 this tax year (April 6th 2020-April 5th 2021)
  2. Your allowance won’t roll over to next year – so use it, or lose it
  3. You won’t be charged any tax on the returns you gain
  4. There are many different kinds of ISA, including Cash ISAs, Stocks and Shares ISAs etc. 

Why can’t under-18s open an ISA? 

An ISA is a type of account which is legislated by the government; while someone under the age of 18 can open a regular savings account, they cannot open an ISA. 

In order to open an ISA, you need to be: 

  1. Aged 18+ 
  2. A UK resident 

What options do under-18s have? 

The best option you have for opening an ISA under the age of 18 is to talk to your parent or guardian about opening a Junior ISA. 

This is an account which is designed to help parents enable their children to engage with ISAs and get a leg up on stocks and shares before they turn 18 and go out into the big, bad world. 

Because it is an ISA account, the money you put into a JISA is invested, and the returns on that investment are protected from income tax and capital gains tax. 

There is a limit on the amount you can put into a JISA account. This is legislated by the government and had the potential to change each year; the limit for the current tax year (2020/2021) is a very generous £9000. 

What are the advantages of junior ISAs?

  1. Junior ISAs provide parents, friends and family members with a convenient, tax-efficient way to save for a child’s future.
  2. The money saved in a junior ISA stays tax-free once the child reaches the age of 18.
  3. The money is locked away until the child turns 18 which, depending on when you open the ISA, gives you plenty of time for the interest to grow. 
  4. A child is able to start managing the money in the account from the age of 16; you won’t be able to access it until you are 18, but you can gain control of the account from the age of 16. 

Read more about Junior ISAs.