My First ISA: ISAs for Under-18s
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.
- You are able to put £20,000 this tax year (April 6th 2020-April 5th 2021)
- Your allowance won't roll over to next year - so use it, or lose it
- You won't be charged any tax on the returns you gain
- 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:
- Aged 18+
- 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?
- Junior ISAs provide parents, friends and family members with a convenient, tax-efficient way to save for a child's future.
- The money saved in a junior ISA stays tax-free once the child reaches the age of 18.
- 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.
- 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.