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Junior ISA definition
A Junior ISA, short for Junior Individual Savings Account, is a tax-free savings and investment account for a child under 18 who lives in the UK. A parent or legal guardian opens and manages it until the child is old enough to take over.
A Junior ISA can hold cash, investments, or both, depending on the type chosen. Any interest, dividends, or capital gains earned inside the account are free of UK income tax and capital gains tax. The money is held for the long term and normally cannot be withdrawn until the child turns 18.
A Junior ISA is a UK scheme set under UK ISA rules, so it is not the same as a child savings scheme in another country, such as Japan's NISA. When the child reaches 18, the Junior ISA normally converts into an adult ISA, and the child can then access the funds or carry on investing within the same tax-free wrapper.
Junior ISA Example
You open a Junior ISA for your child and contribute money each year.
Suppose you add GBP 2,000 in one year and the investments grow by 5%:
GBP 2,000 √ó 5% = GBP 100
That GBP 100 of growth is free of UK income tax and capital gains tax, and your child can access the account once they turn 18.
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