Parents rush to max out junior ISAs

Figures obtained from HM Revenue and Customs (HMRC) from a freedom of information request revealed that nearly 80,000 junior ISA (JISA) accounts used their full allowance during the 2023/24 tax year, higher than the amount seen in the previous four years.

This change marked a 41% increase compared to 2020/21 and a 9% increase from 2022/23.

It is the highest level of maximum contributions (£9,000 per year) recorded since before the coronavirus pandemic struck and reveals thousands of parents and grandparents opting to use all tax wrappers at their disposal.  

A total of £1.8bn was subscribed to JISAs in 2023/2024, with only about 36% going into cash. Whereas, 80% of the JISAs that were maxed out in full, were in stocks and shares accounts. This suggests that the 18-year time horizon and potential for tax-free growth appeals more to those potentially looking to pass on their wealth during their lifetime to the next generation.

What is an ISA?

An ISA, or ‘Individual Savings Account’, is a scheme that allows anybody to hold cash, shares and unit trusts free of tax on dividends, interest, and capital gains. Essentially, it’s a savings account that you don’t pay tax on.  

A cash ISA is a tax-free savings account that allows people to save cash without incurring income tax on interest.  

What is a Junior ISA (JISA)? 

A Junior ISA (JISA) works in much the same way as a standard ISA, but it’s designed specifically for children under the age of 18. Parents or legal guardians can open and manage the account on a child’s behalf, saving or investing money for their future in a tax-efficient way. A JISA can be a cash account or a stocks and shares account. Any interest, dividends, or capital growth earned within a JISA is completely tax-free, just like with adult ISAs.

There is a separate annual allowance for Junior ISAs of £9000 which does not eat into the £20,000 adult ISA limit. Once money is paid into a JISA, it belongs to the child and cannot be withdrawn until they turn 18, at which point the account automatically converts into an adult ISA and the young person gains full control. In short, a JISA is a long-term savings option aimed at giving children a financial head start.

If you want to find out more or you are looking to pass on wealth to your family, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our chartered advisers to see how we can help.  

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash or tax advice. 

Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns.