1. Overview
  2. What Types of JISA are there?
  3. Who Can Apply?
  4. Making a Subscription
  5. Qualifying Investments in the JISA
  6. What Happens When the Child Reaches 18 Years Old?
  7. Withdrawals From an ISA
  8. Closure of the JISA

Overview

The Junior ISA (JISA) will become available from the 1st November 2011 to any eligible child. To be eligible, the child must be:-

Like ‘adult’ ISAs, no tax is payable on any of the income a child receives from JISA savings and investments, no tax is payable on capital gains, and capital losses are not allowable for Capital Gains Tax purposes. The subscription allowance for the 2014/15 tax year is £4,000.

What Types of JISA are there?

A child can hold two types of JISA:-

Unlike ‘adult’ ISAs where the investor can open and subscribe to new ISAs in each tax year, a child can only hold up to two JISAs (no more than one of each type) throughout their childhood (although between ages 16 and 18 they can hold one of each type of JISA plus an ‘adult’ cash ISA). The overall subscription limit for the tax year can be divided between subscriptions to a cash JISA and a stocks and shares JISA as the registered contact directs.

Who Can Apply?

Only a person with parental responsibility for an eligible child (or the child themselves if they are aged between 16 and 18) can apply to open a JISA and become the registered contact. However, the account must be held in the name of the child. The registered contact will be the account contact for all statement and correspondence purposes and there can only be one registered contact at any time. The registered contact is the only person who can give instructions to the JISA manager. During the lifetime of a Junior ISA, the role of registered contact can be passed to another person who has parental responsibility.

If a child is between 16 and 18 years of age, they can become the registered contact for their account at any time, and without the consent of an existing registered contact (subject to an exception for children suffering mental disorder). Once the child account holder has assumed registered contact status, this cannot be passed to another person.

Making a Subscription

The subscription year is based on tax years and runs from the 6th April to the following 5th April. Any person can subscribe to a child’s JISA by way of a cash payment (cheque, debit card, direct debit or standing order). The person subscribing need not be resident in the UK, nor do they have to be related to the child. Once a subscription is made to a JISA, the cash, and any investments bought with the cash, are beneficially owned by the child and the subscriber cannot recover their subscription.

When a child reaches 16 years of age, they can apply for an ‘adult’ cash ISA which they can subscribe to in addition to any subscriptions made to their JISA(s). Therefore, in the tax year in which the child turns 16, they can subscribe up to the JISA limit, and from their 16th birthday they can, in addition, subscribe up to 50% of the overall ‘adult’ ISA limit to a cash ISA.

In addition, from the start of the tax year the child turns 18, they can:

Qualifying Investments in the JISA

The investments that may be purchased and held in a JISA mirror the investments that can be held in an ISA. Uninvested cash held in a stocks and shares JISA is not subject to the flat rate charge of 20% on any interest. If the account holds uninvested cash at age 18 when the stocks and shares JISA becomes a stocks and shares ISA, any interest arising on the cash from that date onwards will become subject to the charge.

What Happens When the Child Reaches 18 Years Old?

When the account holder turns 18, the rules specific to JISAs will fall away. The child can access the savings in the (former) JISA and can make withdrawals. Any savings in the account that are not immediately withdrawn will stay within the ISA wrapper and the same tax advantages will apply. Further subscriptions can be accepted in accordance with ISA rules, but only once additional account holder information is obtained

Withdrawals From an ISA

Investments (including cash) in a JISA may only be withdrawn in the following circumstances:

Closure of the JISA

A JISA can only be closed