The Junior ISA limit for the 2020/2021 tax year is £9000.
Following the March 2020 Budget announcement, the tax allowance is more than doubling from the previous allowance for JISAs. This is great news for parents, grandparents, guardians and family friends who can now invest more money in children's future.
If you already have a Child Trust Fund then you will be unable to open a Junior ISA. However, you can transfer the Trust Fund in to an ISA, just check with your provider for their transfer rules and process.
Transfers can be made between Junior Cash ISAs and Junior Stocks and Shares ISAs, and between ISA providers, but only one Junior Cash ISA and one Junior Stocks and Shares ISA can be held per child at a time.
You're able to split the allowance between a Junior Cash ISA, a Junior Stocks and Shares ISA or a combination of the two.
Junior Cash ISA - Junior cash ISAs work in a similar way to a normal savings account, except that you don’t pay UK Income Tax on the interest your money earns.
Junior Investment ISA - Junior investment ISAs can offer a potentially higher rate of return on the money as savings are invested in the stock market. And you also won’t pay UK Income Tax or Capital Gains Tax on any of the returns.
However, it’s important to consider that the value of investments and so, the amount in the Junior ISA could go down as well as up.
Junior ISAs are very similar to adult ISAs. The accounts are a tax-efficient wrapper that allow parents, grandparents, friends or guardians to invest up to the maximum allowance a year on a child's behalf, in either cash account or investment funds.
Junior ISAs provide parents, friends and family members with a convenient, tax-efficient way to save for a child's future
There are some important things to search for when trying to find the best ISA option for you. Check our tables for latest interest rates and information.
1)Find the Highest Interest Rate – While this seems like an obvious point, many people allow their savings to languish in accounts which aren’t paying a great deal of interest. This is particularly true of accounts that once had attractive opening incentives but are now not working as hard as they should be. When you’re opening an account make sure you shop around to get the best deal possible. Use our comparison tables for latest interest rates and options.
2)Variable or Fixed Rate – Most Junior ISAs are available at variable rates of interest. Normal savings accounts tend to offer a fixed rate account if you tie up your money. The advantage of this is that fixed rate accounts tend to offer a higher rate of interest in exchange for tying up your money. You would then lose the tax-free wrapper, however. Some accounts which offer a fixed rate Junior ISA include: Halifax, Santander, TSB, Nationwide. See our charts for more details.
3)Cash ISA or Investment ISA – This mostly depends on whether you’re willing to take a risk with your money. Investing is always carries some form of risk but the returns are generally much higher. Many Investment ISAs now manage the funds for you and invest to a level of risk you’re comfortable with, so it’s definitely a viable option for your money. A Cash ISA means you will not lose any money and will see some gains but will likely be at a much lower rate. You can also split your money between one of each of these type of ISA.
This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.
Different types of investment carry different levels of risk and may not be suitable for all investors. Please ensure that you read the Important Risk Information for further details. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
29th July 2020
If you're new to investing you will have come across the term "Investment ISA" or "Stocks and Shares ISA" which are ISA accounts designed specifically designed to maximise tax-free returns on your investments. But are these a good idea?
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I found the way the different options are presented very clear - much more useful than some other comparison sites. I sent it to my daughter as well.