Junior ISAs were introduced to encourage parents to save money for their children and to provide an alternative to the Child Trust Funds (CTF) that were only available to children born after 31 August 2002 and before 3 January 2011. It is possible to transfer CTF funds to a Junior ISA.
Junior ISAs were made available in November 2011 after CTFs were phased out. However, unlike the CTF accounts, the government does not contribute any public funds. Investments are available in cash or stocks and shares and a child can have one or both types of Junior ISA.
The money in the account belongs to the account holder. The child can control their account from the age of 16, although any money saved cannot be withdrawn until they turn 18. Junior ISAs automatically turn into an adult ISA when the child turns 18.
Any income from CTFs or Junior ISAs is exempt from Income Tax and CGT on the child or the parent even where the invested funds came from the child’s parents. The current subscription limit for both CTFs and Junior ISAs is £4,368. It has been confirmed that the limit will increase to a generous £9,000 from 6 April 2020.