It’s never too early to start thinking about the future.
A Junior Individual Savings Account or ‘JISA’ gives children the opportunity to start saving early – via cash, stocks and shares, or a combination of the two – within a tax-free wrapper. There are two kinds of JISA available: a cash JISA is a tax-free cash savings account while a stocks and shares JISA can be invested in shares, fixed income investments, unit trusts or investment trusts.
p>The holder will not pay tax on any income or capital gains. The maximum that may be paid into a JISA in the 2014/15 tax year is £4,000 and this can be invested into a cash JISA or a stocks and shares JISA, or allocated between the two. A child can hold either type of JISA or can mix and match between the two. JISAs may be switched from cash to stocks and shares, and back again, so they offer considerable flexibility.
However, a fresh JISA cannot be opened with a different provider in each tax year – the child can only have one cash JISA and one stocks and shares JISA during their childhood, although the cash and stocks and shares components can be held with different ISA providers.
Although a JISA can only be opened for a child under the age of 16 by a parent or a guardian with parental responsibility, anyone can pay money into the JISA for the child’s benefit. The parent who opens the JISA will be the registered contact and will be responsible for managing the account. The money held within a JISA belongs to the child but cannot be withdrawn until they reach the age of 18. Children aged 16 or 17 are allowed to open their own JISA.
According to HMRC, £578m was subscribed to JISAs in 2013/14. In order to be eligible for a JISA, a child has to be living in the UK, aged under 18 and must not be eligible for the Child Trust Funds (CTFs) that were given to children born between 1 September 2002 and 2 January 2011. At present, children who were eligible for a CTF are not eligible to open a JISA, although there are plans to allow the transfer of savings from a CTF to a JISA from April 2015.