On 31 March 2011, the Financial Secretary to the Treasury, Mark Hoban MP, published draft regulations detailing the Government’s new tax-free children’s individual savings accounts entitled ‘Junior ISAs’. It is expected that 6 million children will be eligible for the ISAs when they launch, with a further 800,000 becoming eligible during each of the following years.
The Junior ISA will offer parents a new, tax-free way to save for their child’s future. However, unlike the Child Trust Fund account (which has been closed to children born on or after 3 January 2011), the government will not make any payments into the new accounts. A range of new Junior ISA products are expected to be offered from around November 1st 2011.
The government will publicly consult on the draft regulations until May 2011 and finalised rules for Junior ISAs will be published in the summer. Junior ISAs will be available for children living in the UK who do not have a Child Trust Fund account and people will be able to put money into a cash account or ‘stocks and shares’ account, within a Junior ISA arrangement.
Each child will be able to have one cash and one stocks and shares Junior ISA at any one time and there will be a total yearly limit of £3000 for all payments into these accounts. Any money the accounts make will be tax free. If the parent contributed the maximum amount over 18 years, the child could see resulting funds of up to £70,000 or £80,000.
The Junior ISA accounts will become ISAs when the child is 18. As with Child Trust Funds, the Junior ISA accounts will belong to the child, who will not able to access the money until they are 18.
In publishing the draft regulations, Mark Hoban said: “Junior ISAs are a great example of a simple, clear and jargon-free financial product that allows families to save and invest for their child’s future. They allow parents and family friends to contribute to children’s savings and will strengthen the savings culture. I look forward to seeing these on the high street in a few months time.”
If you want to find out more about ISAs, contact us and we will be happy to help.