Junior ISA Calculator

Junior ISAs have an annual contribution limit of £9,000 per child per tax year, and the account runs from birth until the child turns 18. Any UK resident child under 18 who does not already hold a Child Trust Fund can have one. Parents, grandparents and anyone else can pay in, but the total from all sources cannot exceed £9,000. The child cannot open or control the account except in very limited cases, and takes ownership at 18, at which point they can withdraw the money or carry on holding it as an adult ISA.

Compound growth does most of the work here, because the horizon runs to 18 years. At 6% annual growth, £9,000 paid in every year for 18 years reaches roughly £311,000, of which £149,000 is investment return rather than money handed over. Smaller sums still compound hard. Paying £100 a month for 18 years at 6% produces about £38,700 against £21,600 contributed, close to double the amount put in.

Choosing between the two account types is really a question of how long the money has left to run. A Cash JISA pays a fixed or variable interest rate with a guaranteed return, which suits a shorter horizon, say a teenager a few years off 18. A Stocks and Shares JISA holds funds or shares, and for a newborn the long horizon smooths out short-term falls, which is why it is the usual recommendation. You can hold both. The side-by-side view shows how a small gap in average return, 4% on cash against 6% on equities, widens over 18 years.

Put figures on that gap and it stops looking small. £100 a month from birth to 18 in a Stocks and Shares JISA at a 7% real return comes to £42,500. The same payments into a Cash JISA at 4% AER come to £30,500, a £12,000 difference on about £21,600 of contributions. Parents chasing that gap usually reach for low-cost global tracker funds such as Vanguard FTSE Global All Cap or iShares MSCI World. Nothing has to be sold at 18, since the pot rolls into an adult ISA automatically and keeps its tax treatment.

At 18 the account converts, and the choice then belongs to the child rather than to you. They can keep it as a Cash or Stocks and Shares ISA, or move it into a Lifetime ISA before 40 to pick up the 25% government bonus towards a first home or retirement at 60. The catch is that a transfer counts against the LISA annual limit of £4,000, so a £42,500 pot moved across at £4,000 a year takes 11 or more years to shift. If a house deposit is the goal, opening the LISA at 18 buys back some of that time.

Gifts into a JISA also sidestep a rule that catches ordinary parental savings. Money a parent gives a child normally falls under the £100 parental settlement rule, which taxes income above £100 as the parent's own, but a JISA is exempt and its growth is tax-free throughout. Grandparents have their own angle. The £3,000 annual gift exemption and the £250 small gifts allowance per recipient let them fund an account without inheritance tax consequences, and regular payments can qualify for the gifts out of income exemption if they are structured properly.