Junior ISA (JISA)—a Junior Individual Savings Account
A JISA is a tax-efficient way to save or invest for a child’s future. Investing or saving through a JISA means that no income tax is due on any profit your investment may earn. But there are options to consider, and some rules as to what you can and can’t do in a JISA.
How do JISAs work?
Only a parent or a legal guardian can open a JISA for a child. Although the parent or guardian is responsible for managing the JISA, all the money in it always belongs to the child. At 16 years of age, the child can take control of their JISA but they cannot take any money out until their 18th birthday. At that point, their JISA converts automatically to an ISA.
For the current tax year—i.e. 2018/2019—the maximum the parent or guardian is allowed to pay into a JISA is £4,260. (The UK’s tax year runs from 6th April until the following 5th April.)
Only one of each type of JISA a year
You can only have one Stocks & Shares JISA and/or one Cash JISA in any one tax year. So, for example, you could open a Stocks & Shares JISA in the current tax year (2018/19) and pay in up to £4,260 over the next twelve months. Come the next tax year (2019/2020), you could then start a new Stocks & Shares JISA.
Cash or shares? Save or invest?
There are two types of JISA: a Cash JISA and a Stocks & Shares JISA—we specialise in Stocks & Shares JISAs. Over time, Stocks & Shares JISAs tend to produce higher returns than cash JISAs, especially when interest rates are low.1
How a Stocks & Shares JISA works
Your money is invested (through a fund) in shares which are traded on stock markets. Share prices rise and fall, so there is a chance that you could get back less than you invested. However, share prices do usually recover – it’s just a question of when and by how much. For this reason, the longer you can invest for, the better.
Transferring a Child Trust Fund
Child Trust Funds (CTF) were replaced by JISAs in 2011. You cannot hold a CTF and a JISA at the same time, but you can transfer a CTF to a JISA. Munnypot does not accept CTF Transfers.
Munnypot Junior Stocks & Shares ISAs
Munnypot’s JISA is for children up to 16 years old. If you hold a Stocks & Shares JISA with another provider, you can transfer it to Munnypot.
When you invest with us, we automatically make use of your annual JISA allowance, so you don’t have to remember to set up a new JISA every twelve months.
Once the child reaches 18 years of age, their Munnypot Stocks & Shares JISA will automatically convert to an adult Munnypot Stocks & Shares ISA. When that happens, the child will be able to access the money to help pay for their education, make a deposit on a home or for any purpose of their choosing.
Remember, tax treatment depends on an individual’s circumstances and may be subject to change.
1Barclays Equity Gilt study, 2018