Bringing Up Baby- The Junior ISA
The Junior ISA launched last week – without too much of a fanfare (there are rather more pressing problems for investors at present). Anyhow, a JISA (yes it is an awful acronym) enables anyone under 18 that does not have a Child Trust Fund, to invest up to £3600 per tax year. In essence this is an investment that, like an ISA, grows free of capital gains tax and the bulk of income tax (10% dividend tax is automatically deducted thanks to Mr Brown).
There are a few investment companies now starting to offer a JISA. The main advantage over the CTF is the fund choice – which is much wider and therefore better. The JISA will convert to adult status at 18 which has a higher annual tax year allowance.
So the JISA is predominantly aimed at those investing for up to 18 years. Another often forgotten allowance is that a pension can be set up for a child. The allowance is also £3,600 – but gross – so in reality this is £2,880 with basic rate tax relief provided at source. Obviously a pension is a longer-term investment (particularly for a child) with the earliest access at age 55 under current rules. However it can be a way in which to scrape back some of the taxes lost to the family, albeit one that requires a very long-term perspective. All this adds to the options for helping to provide for children (or Grandchildren).