Junior ISA

What is a Junior ISA?

A Junior ISA is a tax-efficient way to save and invest on behalf of your child.

Payments into a Junior ISA are different from adult ISAs, because the money you put in belongs to your child. Once you put money in, you can’t take it out again, except in exceptional circumstances, and your child can only get access to their money when they turn 18.

There are two types of Junior ISA:

  • Junior Cash ISAs: earn interest like a savings account. The interest rate is fixed and typically based on the rate set by the Bank of England.
  • Junior Stocks & Shares ISAs: (Also known as Junior Investment ISAs), these invest in financial markets with the aim of earning returns for investors that are greater than those you would get in a Junior Cash ISA. Returns are not guaranteed, and the value of your investments can go down as well as up.

Your child can have one or both types of Junior ISA and you can deposit up to the annual limit of £4,260 into them in any combination you like.

For example, you could pay £2,000 into a Junior Cash ISA and up to £2,260 into a Junior Stocks and Shares ISA, or vice versa. You can split the allowance however you want to between the two accounts.

The benefit of a Junior ISA is that you or your child won’t pay tax on any interest, returns or dividends they receive.  

Wealthify only offers a Junior Stocks and Shares ISA.  Any money paid into a Junior ISA will belong to the child, but they cannot access it until their 18th birthday.

How does a Junior ISA work?

Junior ISAs allow your child to keep more of their money by protecting any positive returns they receive from income tax and capital gains tax.

Only a child’s parent or legal guardian can open a Junior ISA account on their behalf.

Your child can have one Junior Cash ISA and/or a Junior Stocks and Shares ISA at any time, into which you can currently contribute a maximum of £4,260 per tax year, per eligible child. You can split the amount however you choose between a Junior Cash ISA and a Junior Stocks and Shares ISA as long as the combined amount doesn’t exceed the annual limit.

You don’t need to use the same provider for your child’s Junior Cash ISA and Junior Stocks and Shares ISA, so you’ve got flexibility to choose the best option for you and your child.

At the start of each new tax year, on 6 April, the child’s annual Junior ISA allowance re-sets and you can start another year of tax-efficient saving, up to £4,260 for each child.

Your child will only be able to access the money within their Junior ISA when they turn 18.

When they turn 18, the Junior ISA is automatically changed into an adult ISA. At this point, they can choose to keep saving or investing, or they can withdraw some or all of the balance to help pay for things like university, or a new car.

Who is a Junior ISA for?

If you want to build an investment pot for your child that neither you or they can touch until your child turns 18, then a Junior ISA could be the answer. Any money paid into a Junior ISA belongs to the child and cannot be withdrawn by anyone other than the child when they turn 18.  

Junior ISAs are available to children who:

  • Are under the age of 18
  • Are residents of the UK, or are dependants of a crown employee (e.g. army employee based overseas)
  • And don’t already have a Child Trust Fund (CTF).

You can transfer your Child Trust Fund over to a Wealthify Junior ISA, but your child cannot have a CTF and a Junior ISA at the same time. When transferring a CTF to a Junior ISA, the full balance must be transferred.   

Who can open a Junior ISA?

Junior ISAs can only be opened by the parent or legal guardian of a child under the age of 18 who fits the eligibility criteria. Once opened the parent/guardian will become the registered contact for the account.

As the registered contact for a Junior ISA, you are the only person authorised to make decisions about the management of the account. You’ll also need to keep Wealthify informed if the child’s personal details change; e.g. if they change their name, address, contact number, or get married. 

When the child turns 18, they will become the registered contact and their Wealthify Junior ISA will change into an adult ISA. They can either keep investing, move it somewhere else, or withdraw some or all of it e.g. to help pay for university, or a car.

The money in a Junior ISA will never belong to the parent/guardian. It belongs to the child, but they won’t be able to access it until their 18th birthday.

16-year olds can open and start paying into an adult Cash ISA whilst still paying into their own Junior ISA until they reach 18.

Can I open a Junior ISA before my child is born?

No – the Junior ISA can only be opened and funded after the child is born. We need the child’s date of birth so that we will know when your child turns 18.

What type of Junior ISA does Wealthify provide?

Wealthify offers Junior Stocks & Shares ISAs.

Wealthify Junior ISAs contain a range of investments from across the globe matched to the level of risk you choose. Our team of experts build your child’s Junior ISA, choosing which investments to buy and managing them on your behalf.

You can choose to invest for you child in an Ethical Plan or an Original Plan. Read more about our Ethical Plans here.

Each Junior Stocks & Shares ISA will contain up to 20 investment funds from providers like Blackrock and Vanguard. Investment funds are a convenient and cost-effective way to invest, as they contain hundreds or even thousands of expertly-selected shares, bonds and other investment types. This means your Junior ISA will contain a diverse range of investments spread across global markets and regions, helping your child to spread their risk.

What is the 2018/19 Junior ISA limit?

The Junior ISA allowance for the 2018/19 tax year is £4,260.

The limit increases to £4,368 for the 2019/20 tax year.

How many Junior ISAs can a child have?

A child can have one Junior Cash ISA and one Junior Stocks & Shares ISA. The annual allowance of £4,260 can be split between accounts any way you like, but the total payments made into both must not exceed this amount in any given tax year.

The two Junior ISAs don’t have to be with the same provider, so you can choose the best option for you and your child. Wealthify does not currently offer a Junior Cash ISA, but we may do in the future, so watch this space.

If your child already has a Child Trust Fund in their name, it would need to be transferred to us in order to open a Junior ISA with Wealthify.  You can transfer a Child Trust Fund into a Wealthify Junior Stocks and Shares ISA using the official transfer process.

Do my Cash and Stock & Shares Junior ISAs have to be with the same provider?

No – you can hold a Junior Cash ISA with one provider and a Junior Stocks & Shares ISA with a different provider.

Who is the registered contact for a Junior ISA?

The parent or legal guardian opening the account will be the registered contact, but the money will not be accessible to them and will always belong to the child. The child won’t be able to access the money until their 18th birthday.

As the registered contact for a Junior ISA, you are the only person authorised to make decisions about the management of the account. You’ll also need to keep Wealthify informed if the child’s personal details change; e.g. if they change their name, address, contact number, or get married.

When the child turns 18, they become the registered contact and their Wealthify Junior ISA is rolled into an adult Stocks & Shares ISA. They can either keep investing, move it somewhere else, or withdraw some or all of it e.g. to help pay for university or a car.

Can anyone contribute to my child's Junior ISA?

Payments made into a Wealthify Junior ISA must come from the registered bank account of the parent or legal guardian who opened the Junior ISA.

Friends and family members are currently unable to gift money directly to a child’s Wealthify Junior ISA, but it can be paid in via their parent or legal guardian.

Gifting can be a great way to help boost the value of a child’s Junior ISA but remember that total payments should not exceed the child’s annual allowance.

Who owns the Junior ISA?

Money added to a Junior ISA belongs to the child. The parent or guardian who opened the Junior ISA acts as the registered contact, but they can’t access the money once it has been deposited, unless there are exceptional circumstances. When the child turns 18, account ownership is transferred to them.

How can I make contributions to a Junior ISA?

If you’d like to make regular, monthly payments to a Wealthify Junior ISA, you can set up a Direct Debit.

You can top up your child’s Junior ISA whenever you like by making a one-off Direct Debit or a bank transfer. For example, when your child receives money as a birthday or Christmas gift. Just sign in to your Wealthify account and visit your dashboard, then click on the ‘top up’ link next to your Junior ISA account.    

No matter how the contribution is made, it MUST come from the bank account that was used to open your Wealthify account.

We don’t currently accept card payments.

Is a Wealthify Junior ISA safe?

Wealthify is authorised and regulated by the Financial Conduct Authority (FCA). Your money is looked after by our team of experienced and qualified investment managers, and we’re backed by global financial services provider, Aviva.

Your child’s money is held securely by our custodian, Winterflood Securities Limited. They are responsible for holding your cash and investments safely. They are regulated by the Financial Conduct Authority (FCA) and are part of Close Brothers Group, who have been trading for more than 130 years. They hold your child’s cash and investments separately from Wealthify (ringfenced) in accordance with the FCA’s client asset rules.

As an authorised firm, Winterflood Securities Ltd. is also a member of the Financial Services Compensation Scheme (FSCS).  This means your child’s investments may be protected up to £50,000.

It’s important to remember that the value of your investments can go down as well as up and you may get back less than you invested. The FSCS scheme does not allow you to claim compensation simply because the value of your child’s account falls below what you originally invested.

Do children pay tax?

 Yes, there are some taxes that are applicable to children if they earn income or returns from investments over a certain threshold.

Most children are subject to income tax if they earn over £17,850 per year.

Their tax-free allowance of £17,850 is broken into three areas:

  • The child’s personal allowance of £11,850,
  • A starting rate for savings of up to £5,000 and
  • The child’s personal savings allowance of £1,000.

They may also have to pay capital gains tax if they earned more than £11,700 in returns from their investments.

If a child earns more than £100 in interest from money given to them by a parent, it should be declared to HMRC, as the parent would then need to pay tax on any interest earned over £100.  This does not apply to money given by grandparents, friends or relatives, or to money paid in to a Junior ISA.

What are the tax benefits of a Junior ISA?

A Junior ISA allows you to save or invest £4,260 per year on behalf of your child without paying tax on any interest, dividends or capital gains they earn.

Saving into a Junior ISA on behalf of your children does not affect your own annual ISA allowance, currently £20,000, as the money will belong to the child.

 

 

Can I transfer an existing Junior ISA to Wealthify?

Yes, you can easily transfer your child’s existing Junior ISA to Wealthify by completing our Junior ISA transfer request form. We’ll send you the transfer forms to complete and return to us, then we’ll contact your existing provider to arrange everything.

Please remember, if you’re transferring a Junior Cash ISA to Wealthify, it will become a Junior Stocks and Shares ISA. Your child’s money will be invested in global financial markets and the value of your investments can go down as well as up.

Can I transfer my child's Trust Fund to a Wealthify Junior ISA?

Yes, but you must transfer the whole balance of your Child’s Trust Fund (CTF) as you cannot have a CTF and a Junior ISA open at the same time.  

When you transfer the full balance of a Child Trust Fund over to a Junior ISA, it doesn’t count towards your child’s current Junior ISA allowance, so you can transfer the whole CTF balance and still save up to £4,260 for them in the same tax year.

You can find more information on Child Trust Funds on the government’s HMRC website.

Can I transfer money from my own ISA to my child's Junior ISA?

There's no direct transfer process available. If you want to move some money from your ISA to your child's JISA you would need to withdraw your ISA funds, deposit them into your registered bank account and then pay it into your child’s JISA.

As soon as the money is received in the Junior ISA, it will belong to the child and you will no longer have access to it, so bear this in mind if you’re thinking about transferring from your own personal ISA or savings account.

 

What is a Child Trust Fund?

Child Trust Funds (CTFs) were introduced in January 2005 to allow parents and families to put money aside for children into an account which they could only access when they turned 18.

CTFs were a long-term savings or investment account for all children born in the UK between 1st September 2002 and 2nd January 2011. So, if your child was born between these dates, they probably have one.

Junior ISAs replaced Child Trust Funds in 2011.

You can transfer Child Trust Funds to Wealthify, at which point they will become a Junior Stocks and Shares ISA.

You can find more information on Child Trust Funds on the government’s HMRC website.

Can I transfer my Wealthify Junior ISA to another provider?

Yes. We’ll be sad to see you go, obviously, but if you choose to transfer your Junior ISA to another provider you can by using their official Junior ISA transfer form.