When you have children, you inevitably begin to look to their future. With the current economic uncertainty across the world, there is no guarantee of financial assistance for the next generation when they become adults. It is therefore more important than ever to build wealth on their behalf, when possible. One tax-efficient method for doing this is by opening a Junior ISA for your children.
In this article, we will answer some of the questions we’re most frequently asked about Junior ISAs. We’ll also detail some of the benefits and features of a Willday Wealth Management Junior ISA.
Who is eligible to have a Junior ISA?
Junior ISAs are available to anyone under the age of 18 who lives in the UK. The funds in the Junior ISA belong to the named child. While they only gain access at age 18, they can take over the management of the account from age 16, as long as the Junior ISA is held in cash.
Who can set up a Junior ISA and who can contribute to it?
The person setting up a Junior ISA for a child must be their parent or legal guardian. Grandparents and other relatives are not able to set the policy up, but anyone is able to contribute to it. This makes it a great idea for birthdays, Christmas or for passing on inheritance tax wealth.
Is there an annual allowance for Junior ISAs?
Yes. Each tax year, up to £9,000 can be saved on your child’s behalf, in a Junior ISA. This is a total amount that may be saved in any one tax year. There are two types of Junior ISA: a cash Junior ISA and a stocks and shares Junior ISA. A child may have one of each at any one time, as long as the contributions across both do not exceed £9,000.
As you may know, adults have an annual allowance for their own ISA of £20,000 per tax year. The £9,000 allowance for a Junior ISA falls outside the £20,000 ISA allowance. If a child is 16, they can have both an adult cash ISA and a Junior ISA, making their total annual allowance £29,000 in any one tax year. Unused allowances are not able to be carried forward to the following year. However allowances reset at the beginning of a new tax year.
What happens when your child turns 18?
As mentioned above, you are able to contribute to a Junior ISA for a child until the age of 18. It is not possible for money to be withdrawn from the Junior ISA until this time. However once the child turns 18, the balance can be removed as a tax-free lump sum. Alternatively the Junior ISA will mature into an adult ISA if no other instruction is given.
The Benefits of saving in a Junior ISA
Investing for your children in a Junior ISA is a form of tax-efficient savings. This is because any investment growth is free from both income and capital gains tax. As the funds cannot be accessed until the child turns 18, it gives the investment a significant opportunity to grow. The final balance will be a great pot to use for university tuition, towards a new home, or for other significant expenses.
Investing in a Junior ISA is a flexible option. Parents can open a Junior ISA for their child with as little as just £1. The amount saved monthly can change, so can be adjusted to suit your financial circumstances. Due to the long-term nature of these savings, just £75 per month has the potential to be worth £26,000 by the time your child turns 18**! This would provide a significant financial boost to your child as they enter adulthood.
Features of a Willday Wealth Management Junior ISA
Our Junior ISAs offer you 24/7 access through our app. This will allow you to continually monitor your investments, and add more funds as you are able. Our team of investment consultants are on-hand at any time via calls, chats or emails, to give their advice and expertise. You can invest up to £9,000 over the duration each year, tax-free. The returns on these invested funds are also tax-free.
If you have already taken steps to build wealth for your children’s futures by setting up a Junior ISA, this can be transferred to Willday Wealth Management should you choose. This transfer is simple to set up, and our team will organise it on your behalf. Once the Junior ISA is set up with Willday, we’ll encourage you to set up an investment goal. We will work with you to achieve this goal, helping your child’s money work towards a brighter future.
Willday’s commitment to a greener future
Eco-consciousness is hugely important to the Willday Wealth Management team. That’s why each time we open a Junior ISA, we’ll support the Woodland Trust in planting four trees. So as well as building a financial boost for your children’s future, we’re working together to give them a greener future too.
We have also teamed up with Willsow to send a plantable children’s book to your child once the Junior ISA is opened. So once they have enjoyed the story, your children can plant the book and in time, meet the story’s main character too!
Contact the Willday Wealth Management team to discuss setting up a Junior ISA today.
* With investing, your capital is at risk and you may get less than what you invested.
** This assumes an average annual growth rate of 5%.
