What is a Junior ISA?

ISAs are accounts that help you to save or invest in a tax-efficient way. Other types of ISAs include:

• Cash ISAs;
• Innovative Finance ISAs;
• Lifetime ISAs (LISAs); and
• Stocks and Shares ISAs.

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Any money earned in an ISA product is free of both income and capital gains tax (CGT). Understanding Junior ISAs and how they compare to other children’s savings options can help you in making the best choice for your family.

How do Junior ISAs work?

Any UK resident aged 18 or over can open an ISA. For Junior ISAs, only parents or guardians with parental responsibility can open an account for children under 16. But, children aged 16 and 17 can open their own Junior ISA. When the child turns 18, the Junior ISA automatically converts into an adult ISA account.

No withdrawals can be made from a Junior ISA until the child reaches 18 and takes control over their account. For this reason many parents choose to save into their own ISA account, where they can choose when to give money to their kids.

Every UK resident, adult or child, has an annual ISA allowance. This is the maximum amount you can pay across all your ISAs each tax year. The tax year runs from 6 April one year to 5 April the following year. For 2025/26, the ISA allowance is:

• £20,000 for ISAs (for adults aged 18 and over); or
• £9,000 for Junior ISAs (for children under 18 years old).

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This limit doesn’t carry over from year to year, so it’s on a ‘use it or lose it’ basis. Unlike adult ISAs, where you can hold and pay into multiple accounts (with the exception of Lifetime ISAs), each child can only have one Cash Junior ISA and one Stocks and Shares Junior ISA at a time. More on this below.

Types of Junior ISAs

There are two types of Junior ISAs:

• Cash Junior ISA - this works much like a regular savings account. You put in money and earn tax-free interest. Cash is usually lower risk and lower reward. While the money is safe from stock market ups and downs, it might lose its purchasing power if inflation is higher than the interest you earn.
• Stocks and Shares Junior ISA - with this type, through either specific company shares or a diversified index fund. Investing is usually higher risk and higher reward. The value of stocks can go up and down, so while there’s a chance to make more money, there’s also a chance to lose some.

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The significant advantage for a Stocks and Shares Junior ISA is that the child can’t access the funds until they turn 18. This built-in restriction encourages long-term saving, which can help smooth out market fluctuations and potentially lead to greater growth over the years.

Junior ISAs provide a clear, tax-efficient way to save for your child’s future. This could be for a house deposit, support university costs or other financial milestones.