Junior ISAs are now available

An end to Child Trust Funds
One of the earliest decisions of the Coalition Government was to scrap contributions to Child Trust Funds (CTFs), producing a saving of about £550m a year. In spite of the ‘free’ contribution of up to £500 from the government, almost a quarter of CTFs were opened by HMRC under default provisions because the CTF voucher was unused a year after its issue.

The final birth date to qualify for a CTF contribution was 2 January 2011. CTFs for children born by that date will run until age 18, as planned. While no further government payments will be made, parental and other contributions are possible, subject to a total maximum of £3,600 per year.

A start to Junior ISAs
The replacement for CTFs, Junior ISAs (JISAs) was announced in October 2010 and went live on 1 November 2011. Broadly speaking, JISAs will be available to any child under 18 who was born before 1 September 2002 or after 2 January 2011. The key points about JISAs are:

  • There is no government contribution, but any individual may contribute.
  • The maximum overall contribution is £3,600 per tax year. This limit will rise in line with the CPI from 2013/14 – there is no increase next tax year.
  • The JISA has two investment components – cash or stocks and shares – but unlike the adult ISA there are no restrictions on how a contribution can be split between the two.
  • Withdrawals before age 18 are only allowed in very restricted circumstances.
  • The tax benefits are the same as adult ISAs. In addition, there is no personal liability on income generated from contributions made by you as a parent

And 16-17 ISAs, continue
The introduction of JISAs will not mean an end to the availability of full cash ISAs for 16-17 year olds, which are subject to the usual cash component limit (£5,340 in 2011/12 and, as we now know, £5,640 in 2012/13). Quite why 16 and 17 year olds can put more into cash ISAs than the juniors or adults has not been made clear.

Junior ISAs work on a tax year basis, unlike CTFs, which were based on birth dates. Maximising contributions does mean investing before 6 April 2012.

If you any questions about Junior ISAs, please contact us on
020 3865 2379

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