How do Junior ISAs work and which offer the best rates for 2025?

An individual savings account (ISA) provides a tax-efficient environment in which to hold cash or investments. An ISA holder can add to the account every year, up to an annual limit, and they won’t be taxed on the interest, capital gains or dividend income generated.

A Junior ISA is specifically for children and has a lower annual limit than other ISAs you might be familiar with. In other respects, it is very similar.

Any child (under the age of 18) living in the UK can have a Junior ISA.

Children over the age of 16 can open and manage an account themselves, while children under the age of 16 will need an adult with parental responsibility to open it for them.

There are two types: a cash Junior ISA and a stocks and shares Junior ISA. Each child can have one of each (or just one, as you prefer).

A cash ISA will grow by a stated amount each year, which is the advertised interest rate. Over many years, it is less likely to keep pace with inflation.

A stocks and shares ISA does not grow by a guaranteed rate. Instead its value will fluctuate based on the performance of the investments it holds. Still, over the long term, investments tend to achieve higher returns than cash.

A child can have up to £9,000 added on their behalf to their ISA or ISAs in the current tax year. This limit may change in future tax years.

Any adult can pay into a Junior ISA on the child’s behalf, so it can be a useful way to combine funds from friends and family.

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Only the child can access the money in their Junior ISA and they only gain access when they turn 18 (though they can manage the account from the age of 16).

Get a free fractional share worth up to £100.
Capital at risk.

Terms and conditions apply.

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Get a free fractional share worth up to £100.
Capital at risk.

Terms and conditions apply.

Go to website

At age 18, the account will convert to a normal, adult ISA. The child will then be free to move the money to a different type of ISA, make their own investment decisions or withdraw all the money to spend.

In many cases, they don’t. Children have the same tax-free personal allowances as adults (for example, £12,570 of income and a further £1,000 personal savings allowance). It’s quite rare for a child to exceed these and incur a tax bill.

However, there’s one important exception: If a parent saves money for their child and it generates interest of over £100 in the tax year – and if the parent has used all of their own £1,000 personal savings allowance in that year – the interest generated by the children’s savings will be taxed as the parent’s income.

Assuming an interest rate of 4 per cent, this would occur if you saved £2,500 or more in your child’s account for a full year. £100 of interest could incur income tax of £20, £40, or £45, depending on your tax band.

If this specific scenario applies to you, you can be confident a Junior ISA will have tax benefits for your family. Otherwise, you might want to compare Junior ISAs with other children’s savings accounts. The main differences are:

Heading into March 2025, the best interest rate available on a Junior cash ISA is 4.5 per cent, from Stafford Building Society. Next is 4.35 per cent with Leek Building Society, then 4.25 per cent from Coventry Building Society. These ISAs can be opened in a branch or by post.

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If you would prefer to open a Junior cash ISA online, the best available rate is 4 per cent, from NS&I, followed by Tesco Bank with 3.5 per cent.

Interest rates can change – and frequently do. It’s important to check the best rates available at the time you open the account.

Junior stocks and shares ISAs don’t offer an interest rate as their returns may be generated through any combination of interest, capital gains and dividend income. Returns are generated by the investments held, rather than by the account.

So, when comparing providers, you might consider the fees, the ease of use, the range of investments offered and the provider’s reputation for service.

Based on these criteria, some of the best Junior stocks and shares ISAs to consider are from Hargreaves Lansdown, Fidelity, and Wealthify (owned by Aviva).

When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.