Junior ISA’s are basically the name given to a tax-free savings allowance, ie: the amount, that can be saved tax-free for a child. The amount any child can save is their “allowance” and in the current tax year (2023/24), the limit is £9,000.
Some people think that children do not pay tax – this is not true! They pay tax like everyone else does in the usual way on earned income, this is where a junior ISA can protect their savings income from the tax-man.
The Junior ISA itself can be accessed by the person (child) after they turn 18 leading to the first potential pit-fall. Imagine you have saved all your life for your “little Johnny” to get a good start in life. Then “little Johnny” turns 18 and gets in with the wrong crowd (or decide they want a fast car for example). They simply walk into their bank and withdraw the lot. Even though you saved the money, you have no right to intervene or even know they have done it. Not a nice position to be in we think!
There are 2 types of junior ISA:
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The value of any investments will go up and down meaning your capital will be at risk. As advisers, we will ensure you understand any risk taken and that any investment selected is appropriate based on your needs and circumstances.
Tax treatment of any investment is based on individual circumstances and could be subject to change in the future. As advisers, we will ensure you understand the limitations of any tax planning ensuring it is appropriate based on your needs and circumstances.
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