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Junior ISAs (or Individual Savings Accounts) have replaced Child Trust Funds (CTFs) and offer a simple way for families to save towards a child's future. One of the key benefits is that no income tax will be paid on any return or interest earned in the savings account, just like an adult's ISA. They are intended as a way of creating financial support for children when they start their transition to adulthood, being used to pay education fees, put deposit down on a property or even small business start-up. They work very similarly to adult ISAs, in that money deposited will be tax free, and when the child reaches adulthood they are able to withdraw that cash without losing the tax benefits. Junior ISAs are covered by the Financial Services Compensation Scheme, and so is a safe investment as long as they are held with UK-regulated banks, building societies or registered fund management company. Just like regular ISAs, the Junior ISA Tax Allowance means that only a certain amount of money can be saved tax-free annually. Junior ISAs will replace Child Trust Funds which are now defunct. While CTFs were boosted by £500-£1000 state contributions, Junior ISAs merely present a tax benefit to those who want to save for their children's futures. Kids can avoid paying tax on their savings by completing an R85, or tax-exemption form, but any earnings over £100 in a year will be taxed at parent's income rate. Junior ISAs present an opportunity for young savers to avoid income tax. Children couldn't touch their Child Trust Funds until they were eighteen, and Junior ISAs are likely to function similarly, although there have been some suggestions this could be lowered to sixteen. It's at this point that the money becomes fully registered in the child's name. Parents who already have a Child Trust Fund set up can continue to deposit up to £1, 200 per year into it, but will not receive any further state contributions. The good news is that children who were too old to receive CTFs are now eligible for Junior ISA accounts. If you're looking for a way to create a nest egg for your children and they missed out on a Childs Trust Fund, then a Junior ISA is a great way to make tax-free savings for their future. They'll only get access to the money once they are adult, and can use it in any way they see fit, from paying university fees to paying for driving lessons or insurance. A junior isa is a great way of saving towards the future, whatever it may hold. If you are interested in opening a junior isa look online for more information.
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