I have had a number of enquiries on this subject over the last couple of weeks so I thought it would be good to put something here for information purposes.
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 & shares JISA can be invested in shares, fixed income investments, unit trusts, or investment trusts and the holder will not have to pay tax on any income or capital gains.
The maximum that may be paid into a JISA in the 2013/14 tax year is £3,720, which may be invested into a cash JISA or a stocks & shares JISA, or can be allocated between the two. A child can hold either type of JISA or can mix and match between the two. Unlike a regular ISA, a JISA may be switched from cash to stocks & shares, and back again. 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 & shares JISA during their childhood, although the cash and stocks & shares components can be held with different 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 for the JISA 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 The money held within a JISA belongs to the child but cannot be withdrawn until they reach the age of 18.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 or a JISA may be opened by their parent or guardian.
In order to be eligible for a JISA, a child has to be living in the UK, be 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 the Government has announced plans to allow the transfer of savings from a CTF to a JISA from April 2015.
Paul Hoskin Hoskin Financial Planning
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