A Junior ISA is an ideal savings option, allowing you to put money away for your child, with the added bonus that friends and family can also contribute. This really lets you secure a financial future for your child as they take their first steps towards adulthood. From helping on their first home deposit to funding driving lessons, it’s a smart move to prepare for the future. Here at The Children’s ISA, we like to think of the Junior ISA as a long term investment into your child’s future. A smart savings option, the Junior ISA account currently offers tax advantages, such as tax-free savings of up to £9,000 per year, exempt from income tax and capital gains tax.

As we know most new parents are time-poor, so we wanted to share your most asked questions about Junior ISAs this month, including the ownership of the funds held in the Junior ISA.

Can parents withdraw money from a Junior ISA?

The simple answer here is no. Funds are invested on behalf of the child and managed by the Junior ISA. Only the child whose name the account is held in can access the funds, once they reach their ‘adulthood’ aka their eighteenth birthday. In terms of withdrawing money, only the young person who is the account holder can access the funds when they turn eighteen.

When can children access the funds? 

Your sixteen year old can become the manager of the ISA on their birthday, however, they can only access the funds once the Junior ISA becomes an adult ISA, at the ripe old age of eighteen. This will then give them full access to the funds.

Can grandparents open a Junior ISA?

No, only a child’s parent or legal guardian can open a Junior ISA account. The registered contact, typically the child’s parent or guardian, manages the account on behalf of the child. Once this is open, the parent or guardian can share the information allowing family members, friends and grandparents to then contribute to the account.

From September 2011, when the Junior ISA was brought in, any child who is a UK resident and under the age of 18, can hold a Junior ISA Account, as long as this is opened by a parent or legal guardian. We also allow for the Child Trust Fund to be transferred over into a Junior ISA, for those born from September 2002 – January 2011.

Can I close by the child’s Junior ISA?

No – only the child can once they reach the age of 18. The registered contact has the authority to manage the account but cannot close it until the child turns 18.

What happens if a child passes away before turning 18?

If a child with a Junior ISA passes away before their 18th birthday, the funds in the account are transferred to the child’s estate. In cases of terminal illness, parents can access the funds by following specific procedures with HMRC. This process doesn’t require contact with HM Revenue & Customs but the account provider will need a copy of the death certificate to close the account and release the funds.

Are there any penalties or consequences for over-contributing to a Junior ISA in a year?

The specific penalties for over-contributing to a Junior ISA are not detailed in the sources consulted, but typically, exceeding the annual limit (currently £9,000) could lead to tax implications or require the excess funds to be withdrawn or taxed.

What are the specific tax advantages of a Junior ISA?

The interest and gains in a Junior ISA are tax-free, meaning they do not count towards the child’s personal savings allowance. This can significantly enhance the growth of investments over time due to the compound interest effect without tax deductions.

If you would like any more advice on Junior ISAs visit us here, or contact us here and one of our small, expert team will be in touch!