A Junior ISA (or JISA) is a tax-free savings account set up by a parent or guardian for a child below 18 years of age. Anyone can contribute to the account, but only the child can access the money – and only after they turn 18.
For the Nutmeg Junior ISA, the child must be under the age of 16 and only the registered contact may contribute.
The account holder pays no tax on interest, capital growth or dividends on any contributions up to the Junior ISA allowance. The child investment account is essentially an amended version of the adult ISA (more on that here), but with a lower limit and different restrictions on withdrawals.
There are two types of JISA:
At Nutmeg, we offer a stocks and shares JISA.
A child can have one cash JISA, one stocks and shares JISA, or both.
With Nutmeg, you may only open one pot per JISA, but a parent or a guardian may open multiple JISAs, albeit only if they relate to different children.
As of the 2020-21 tax year, the annual tax allowance or limit for a JISA is £9,000. For any contributions over and above the limit, the excess is held in a ‘feeder’ savings account in trust for the child until the next tax year and is then automatically to the new tax year’s JISA. Note, the money cannot be returned to whoever contributes.
Your JISA allowance resets at the start of each tax year. The tax year ends on 5th April and your allowance, or any unused portion of it, doesn’t carry over to the next tax year. If you don’t want to lose it, use it.
Unless you are a crown servant abroad, only a parent or legal guardian residing in the UK can open a JISA on behalf of their child.
The parent or guardian who opens the JISA is responsible for managing the account and is known as the ‘registered contact’. In all cases, the person who applies for the JISA will become the first registered contact. To open a Nutmeg JISA, the registered contact must contribute a minimum of £100.
Only the ‘registered contact’ can manage the account, and there can only ever be one registered contact at any given time. The child can apply to become the registered contact at 16, whereas anyone else must be at least 18 years of age.
The registered contact is the only person who can:
For a Nutmeg Junior ISA, the registered contact is also the only person who can pay into the account. You must also be a Nutmeg account holder to become the registered contact. However, the account does not need to be funded in order to do so.
Those who live outside of the UK can only become a registered contact if they are a crown servant (in the UK’s armed forces, diplomatic service or overseas civil service) and the child depends on them for care. Both criteria must apply.
The role of registered contact can be passed to another person with parental responsibility. However, registered contact status can usually only be given on agreement with the existing registered contact.
There are exceptions where the prior consent of the existing contact is not needed:
The money in a JISA belongs to the child in all but exceptional circumstances.
When the child turns 16, they may apply to become the registered contact and manage the JISA themselves. However, they cannot withdraw the money until they’re 18.
Anyone, including parents, friends and family, can contribute on behalf of the child, provided total contributions fall below the JISA limit. However, at Nutmeg only the registered contact can contribute.
Any contributions to a JISA are not factored into your annual ISA allowance.
A registered contact may transfer either a JISA or Child Trust Fund from another provider to Nutmeg. Partial CTF or JISA transfers are not allowed.
The child can take control of the account when they’re 16, but cannot access the money until they turn 18. If not withdrawn at age 18, the money rolls into an adult ISA.
You cannot have a JISA as well as a Child Trust Fund (CTF). If you want to open a JISA you must transfer the CTF in.
A Child Trust Fund is a long-term tax-free savings account for children. The CTF scheme is now closed, so you cannot apply for a new one. But people with existing CTFs can continue to contribute £9,000 a year into them.
If your child is terminally ill, you can apply to HMRC to release the funds in the JISA.
If your child dies, any money in the JISA will be paid to whoever inherits their estate.
The information to be supplied is described in more detail by HMRC.
As with all investing, your capital is at risk. The value of your Junior ISA can go down as well as up and you may get back less than you invest. To open a Nutmeg JISA, your child must be under the age of 16 and funds cannot be withdrawn until your child turns 18. Tax treatments apply and may be subject to change in the future. If you are unsure if a Junior ISA is the right choice for you and your child, please seek financial advice.