Breaking down Junior ISA and Junior GIA investments

Investing in a child’s future is a priority for many parents and guardians.

It not only allows you to build wealth resilience for your child, but it helps you create a foundation on which to achieve their long-term financial goals.

There are two popular avenues in the UK when it comes to junior investment accounts – the Junior Individual Savings Account (Junior ISA) and the Junior General Investment Account (Junior GIA). Read on, where we breakdown their features, benefits, and differences, which is essential to make informed decisions.

Junior ISA (Junior ISA)

A Junior ISA is a tax-efficient savings account that’s designed for individuals under 18. It allows parents or legal guardians to grow savings and invest on behalf of their child without incurring income tax or capital gains tax (CGT) on the returns.

Contribution limits: For the 2024/25 tax year, the maximum amount you can contribute to a Junior ISA each year is £9,000. This limit applies to all types of Junior ISA within the year, and contributions can be made by parents, family members, or friends – provided the total does not exceed the annual allowance.
Types of Junior ISAs: There are two main types to consider. A cash Junior ISA functions similarly to a regular savings account, offering interest on deposits and sheltering the money from tax. stocks and shares Junior ISAs allow you to invest in various securities like stocks and bonds, with the potential for higher returns accompanied by higher risk.
Access to funds: Funds in a Junior ISA are locked until the child turns 18, at which point the account will automatically convert into a standard adult ISA. The child can control the ISA from the age of 16, but cannot withdraw the funds until they become a legal adult.
Tax benefits: All returns within a Junior ISA are free from UK income tax and capital gains tax, ensuring the child’s savings can grow without tax deductions, leading to the potential for significant sums when they reach 18.

Junior general investment account (Junior GIA)

A Junior GIA is another junior investment account, except this one is typically set up as a ‘bare trust’ – meaning it’s opened by a parent or guardian on behalf of the child beneficiary. It offers flexibility but differs from a Junior ISA in several key aspects.

Contribution limits: Unlike Junior ISAs, there’s no contribution limit on Junior GIAs, allowing for unlimited investments on behalf of the child.
Tax implications: Whilst there’s no limit on contributions, returns within a Junior GIA are subject to taxation. However, the child’s personal tax allowances can be utilised to help mitigate the impact of CGT.
Account setup: Junior GIAs can be opened by anyone, not just parents or legal guardians. However, they are typically established by trustees (e.g., parents or grandparents) who manage the account until the child reaches adulthood.
Access to funds: Trustees can access funds in a Junior GIA at any time, even before the child turns 18. However, this is provided the withdrawals benefit the child, such as covering educational expenses. Once the child turns 18, they gain full control of the assets.

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Both Junior ISAs and Junior GIAs serve as valuable tools for investing in your child’s future and building their wealth effectively. The choice between them depends on your individual circumstances, tax considerations, the purpose of the savings, and desired flexibility.

We recommend consulting a financial advisor to determine the most suitable option that’s tailored to your family’s needs.

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Please note, the value of your investments can go down as well as up.