Junior ISAs (JISA) come in two types - a cash JISA or a stocks and shares JISA – and children can have one or both types.
Children are eligible for a JISA if they’re under 18 and living in the UK, although there are exceptions for children of Crown servants living outside the UK. If you’re a parent or guardian with parental responsibility, you can open a JISA and manage the account, but the money belongs to the child, who can take control of the account when they reach 16. They cannot, however, withdraw the money until they turn 18.
While anyone can pay into the JISA, contributions are limited to an annual cap (£9,000 in 2023/24) which can be split between two ISAs. Once paid in, money can be transferred between JISAs and a Child Trust Fund account freely, but not into an adult ISA. JISAs automatically turn into an adult ISA when the child turns 18 and remain exempt from tax.
Gifts to children ordinarily cause complications because of the parental settlement rule. If the gift generates gross income above £100, be it interest or dividends, all the income is taxed on the parent who made the gift. Gifting into a JISA circumvents this risk, meaning parents do not suffer a tax liability from income generated by assets in their children’s name.