A Junior Individual Savings Account (more commonly known as a JISA) is ‘wrapper’ that comes with several major tax advantages.
The key advantages are:
- No parental settlement rule
- Freedom from Capital Gains Tax on any gains made;
- Free from Income Tax on interest earned in the cash JISA component;
- Incomes from ISAs do not need to be included on tax returns;
- Proceeds, including partial encashment, are paid tax-free.
- An ISA ceases to be exempt from tax from the date of death of the investor.
All tax payers, now including non-tax payers are no longer able to reclaim the 10% tax credit on UK dividends from a Stocks & Shares ISAs. However, income tax deducted at source from interest on bond investments (currently 20%) can be reclaimed in full.
Why would you invest or save money in a JISA?
As we mentioned above, the parental settlement rules will not apply to parental contributions to JISAs.
If “Parental Settlement” rules did apply then the total income from the JISA, and any other investments made by the parent for the child, would be assessed upon the parent, if it exceeds £100 per annum, until the child reaches 18 or earlier marriage.
Ultimately, it is to build up a tax beneficial nest egg for your children’s future that will continue to benefit from these tax breaks when they eventually become a taxpayer. JISAs benefit from tax advantages over holding cash and investments directly, and were introduced by the Government in 1999 to offer an attractive tax-free shelter for anyone aged 16+ for cash ISAs and 18+ for stocks and shares ISAs.