subject: Important Points To Be Aware Of When Opening A Junior Isa For Your Child [print this page] If you're thinking about opening a Junior ISA for your child then you may well have a few questions. In this article I'm going to look at some of the main points which often come up when people ask about children's ISAs.
The first thing to be aware of is that not all children are eligible to have a cash Junior ISA. This surprises a number of people, but it's important to be aware that a few years ago the government introduced the Children's Trust Fund. Although this scheme is no longer active, children who were born during that time when the CTF scheme was active, and had a Trust Fund opened for them, are not eligible to open a Junior ISA as well.
Assuming that your child is eligible to open one of the children's ISAs available, the next thing to decide is whether to opt for a cash Junior ISA, a stocks and shares JISA, or indeed a combination of both. Although children can't hold a CTF account and a Junior ISA, they can have both a cash Junior ISA and a stocks and shares Junior ISA.
The specific differences between the cash Junior ISAs and the stocks and shares Junior ISAs requires more attention than can be offered briefly within this article, but if you are interested then you're recommended either to talk to a financial adviser, or look out for an article I will be publishing very shortly which covers the subject in an easy to understand way.
Something which surprises a lot of people when they first start investigating the idea of opening a Junior ISA for their child is that there is a limit on how much can be credited towards a child's account tax-free. In fact there is a myth that is very popular amongst many people that children's bank accounts are tax-free.
In fact this isn't the case at all, and in the UK children are just as eligible to pay tax as adults. The point is though that in practice children's bank accounts do not generally have sufficient funds credited within each financial year to exceed their statutory tax-free allowance.
With a Junior ISA the maximum amount which can be credited within one financial year is 3,600. If your child has both the cash Junior ISA and a stocks and shares JISA then the total amount which can be credited between both accounts is still 3,600. The total amount credited to both accounts combined within a year must not exceed this amount, regardless of where the money comes from.
Another fact which surprises people when looking into this is that the ISA account does legally belong to the child, as do all the funds within it. Nobody other than the child can withdraw anything from the account, and even your child is prevented from accessing any of the funds until he or she turns 18.
In the unfortunate situation that your child's becomes seriously ill, or even dies before their 18th birthday, then there are ways in which the funds can be accessed. In this case it's important to contact HM Revenues and Customs to advise them of the situation, since if your child is terminally ill you may need to access the funds in order to be able to support them.
Another important point with children's ISAs is that anyone at all can credit the account at any time. This might seem obvious, but in fact with the Child Trust Fund accounts this wasn't the case. In fact the Child Trust Funds had a number of limitations, including limiting what the money could be used for once the child turns 18. With the children's ISAs not only can anyone at all credit the account at any time, but once your child turns 18 they are free to be able to use the money in whichever way they feel most appropriate.
