My mother wants to pass some money over to invest in my daughter’s future. She was considering whether she could set up a Junior ISA and then how much she could pay into it.  My daughter turns 16 in a couple of months’ time.

Andrew

Rachel Vahey, AJ Bell Head of Public Policy, says:

A Junior ISA can be a fantastic way to save tax-efficiently for a child’s future. Up to £9,000 can be invested each year up to the child’s 18th birthday when they will be given the option to convert it into an adult ISA or withdraw a lump sum. Some people worry about giving their child the option to take so much money at what could be an impressionable age, but many young adults decide to continue with the savings habit.

A Junior ISA has to be set up by the parent or guardian of the child – the ‘registered contact’. Although, a grandparent cannot set up a Junior ISA for their grandchild, there is nothing stopping them from paying into it directly. The £9,000 subscription limit is completely unaffected by any other ISA payments the parent or others are making – so they could pay £20,000 into their own ISA and £9,000 into the child’s Junior ISA. But as mentioned above, on maturity the money belongs completely to the child to decide what they want to do with it, the parent or grandparent has no say over that.

Until the child’s 18th birthday, generally no withdrawals can be made from the Junior ISA account. Transfers in and out of the Junior ISA can only be made from and to another Junior ISA. The Junior ISA can be either a cash ISA or an investment (stocks and shares) ISA. A child could have one of each type – one cash and one investment Junior ISA. But their £9,000 subscription allowance is shared across the two types.

YOU CAN ONLY HAVE ONE OF EACH TYPE OF ACCOUNT

However, the child can only ever have one cash Junior ISA and/or one investment Junior ISA. If the parent or guardian wants to change provider, then they have to transfer the current Junior ISA to a new Junior ISA with the new provider; they couldn’t just set up another one and leave the old one behind.

A child who is aged 16 or over can also take out their own adult cash ISA. This means that £20,000 could be paid into the adult cash ISA and £9,000 into the Junior ISA for the two tax years when a child could have both types of ISA. (The minimum age for an adult investment ISA, however, is 18.)

However, this ‘loophole’ is being closed. From the new tax year – 6 April 2024 - the minimum age of a cash ISA is going up to age 18. If a child is under 16 at that date, then they cannot take out an adult cash ISA until they turn 18.

But if the child is 16 or 17 on 6 April 2024, and they don’t currently have an adult cash ISA, then they can take out a single adult cash ISA. And those young adults aged 16 or 17 who already have an adult cash ISA can continue to pay into it.

So for these young adults a total of £29,000 can continue to be paid into their ISA savings this tax year.

ONE-OFF PAYMENTS

If you're the Junior ISA's registered contact (the person responsible for managing the account), just log in to the account and click on ‘Single payment’. From this screen you can also create a link which you can email to relatives or friends, letting them pay into the Junior ISA. They’ll need to confirm the child’s surname and date of birth to make the payment.

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