JISA and CTFs both benefit
JISAs replaced Child Trust Funds (CTF) in 2011, but those who still hold CTF will continue to benefit from the increased allowance. Both JISA and CTF are a tax efficient way to build up savings for a child. It is not possible to have both a JISA and a CTF.
Savings for children
A junior ISA can be opened for any child under 18 living in the UK and the money can be held in cash and/or invested in stocks and shares. Once the person who has parental responsibility for a child has opened the account, anyone can contribute to it. The child can manage the account from age 16 and at age 18 they can withdraw the money if they want, when the account otherwise becomes a normal cash or stocks and shares Individual Savings Account (ISA). Alternatively, they can keep saving into it as a standard ISA.
The tax benefits for JISAs and CTFs are the same as for an adult ISA. So, there is no Capital Gains Tax and no tax on income.
The potential of a JISA
It is estimated that if £9,000 was invested every year from birth and assuming a 2% annual return, which is obviously by no means guaranteed, the JISA would be worth around £194,000 at age 18. Saving such a large amount is obviously out of the question for most people, but whatever amount you can afford to save for your child’s future, a JISA is an ideal choice.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.