Important information
Tax treatment depends on your individual circ*mstances and may be subject to future change.
Your capital is at risk. All investments carry a degree of risk and it is important you understand the nature of these. The value of your investments can go down as well as up and you may get back less than you put in.
Junior cash Isas provide predictability for your returns – something a stocks and shares alternative may not. We list the best rates available below and how they compare to standard savings accounts.
Junior Isas have seen a steady increase in popularity since they were introduced in 2011. According to data from the HMRC, around 1.2 million junior Isas were opened in the year 2021 to 2022. This is the latest data on record and was an increase on the previous year when subscriptions nearly reached the one million mark.
These investment vehicles are just one of many options if you’re looking to start putting some money away for your child. So below we list the best rates and explore whether you should take out a standard savings account instead.
We also explore:
- What is a junior cash Isa account?
- What is the difference between a junior cash Isa and a junior stocks and shares Isa?
- Our best stocks and shares junior Isas
- What are the alternatives to a junior Isa?
Read more: Our best stocks and shares Isas
What is a junior cash Isa account?
While an Isa is only available to those aged 18 or older, younger savers and investors can still plan for their future tax-efficiently. Through a junior Isa, those aged 18 or younger can save or invest up to £9,000 each year into one of these accounts. To open the account, they’ll need the permission of a parent or legal guardian and the returns generated will be tax free.
It’s also an account which aims to promote long-term growth. This is because any money added can’t be withdrawn until the child is 18, although they will be able to manage their funds by the age of 16. More on junior Isas can be found in this explainer piece.
Junior Isas come in two forms, a cash or stocks and shares version. A cash junior Isa sits in a savings account which earns an annual rate of interest.
No management fees for 12 months with Wealthify
If you’re thinking about investing, then now could be a good time to do so with Wealthify: your easy-to-use, online saving and investing service. As a Times Money Mentor reader, Wealthify are offering zero management fees (usually 0.6%) for new customers who open any one of their investment products, including Isas, Junior Isas, Pensions and General Investment Accounts. To be eligible, you’ll need to use the link below.
T&Cs apply. Capital at risk. The tax treatment of your investment will depend on your individual circ*mstances and may change in the future. Wealthify is authorised and regulated by the Financial Conduct Authority.
The best junior cash Isa rates
Coventry BS offers the best rate on the market, with a £5,000 deposit earning around £248 in interest each year if the rate never changed.
| Provider | Account name | Interest rate (AER) | Min/max deposit | Account access | |
|---|---|---|---|---|---|
 | Junior ISA | 4.85% | £1 / £750,000 | Branch | |
 | Junior ISA | 4.80% | £1 / £750,000 | Branch / Post | |
 | Junior Cash ISA | 4.75% | £1 / £450,000 | Branch / Post | |
 | Junior Cash ISA (2) | 4.70% | £1 / £250,000 | Branch / Post / Telephone | |
 | Cash Junior ISA (2) | 4.60% | £3,000 / £2,000,000 | Branch / Post / Telephone |
Powered by data from Savings Champion
Is a junior Isa better than a savings account?
Junior Isas generally pay less than their standard fixed rate counterparts. According to Moneyfacts, a data company, the average junior Isa paid 4.12% in March, which is 0.47 percentage points less than the average one year fixed rate bond.
We mention this because some standard savings accounts don’t have an age restriction – so you could take advantage of these better rates.
While the data company says many junior Isas pay more than the typical easy access savings account – the latter does allow you to instantly withdraw your money and therefore comes with better accessibility features.
However, the tax advantages of a junior Isa could be significant for some savers.
Outside a junior Isa, children are allowed to earn £100 in interest a year without being taxed. If this threshold is exceeded, then all the interest earned will form part of the legal guardian’s own savings income.
If this exceeds their own personal savings allowance, then the legal guardian could be liable for an added tax bill.
To illustrate how much it takes to earn more than £100 in interest a year, consider the following examples.
| Deposit | Interest rate over the year | Total interest earned over one year |
| £2,000 | 5% | £100 |
| £3,500 | 3.5% | £105 |
| £5,000 | 2% | £100 |
What are the best savings rates?
If you’re interested in exploring a standard savings account instead, we’ve listed some of the best easy access accounts below. For an idea of the best fixed rate bonds, make sure to visit our detailed listings.
Read more: The best savings accounts in 2024
| Provider | Account name | Interest rate (AER) | Min/max deposit | Account access | |
|---|---|---|---|---|---|
 | Loyalty Saver | 5.20% | £5,000 / £10,000,000 | Branch / MobileBanking / Online / Telephone / Mobile | |
 | Four Access Saver (Issue 1) | 4.90% | £1 / £1,000,000 | Online | |
 | Easy Access Account Special Edition 1 | 4.87% | £25,000 / £500,000 | MobileBanking / Online | |
 | Limited Edition Easy Access (provided by GB Bank) * | 4.85% | £5,000 / £85,000 | Online | More info |
 | Simple Saver (Issue 4) | 4.85% | £1 / £500,000 | Online |
Powered by data from Savings Champion
What is the difference between a junior cash Isa and a junior stocks and shares Isa?
A junior cash Isa keeps is a savings account, which means you’ll earn a stated return over the course of the year. This is either fixed, where your rate is guaranteed, or variable, which means it fluctuates at your provider’s discretion.
With a junior stocks and shares Isa these returns are unknown. Over the same period you may well end up making more than the very best savings accounts on the market – but you also have the potential to lose your original capital.
This is because the money in a junior stocks and shares Isa sits within a company, and if that company performs poorly then so do your returns.
Read more: Should I invest in a cash Isa or stocks and shares Isa?
Choosing the right stocks and shares is more complicated than picking the best rate on a cash Isa.
You’ll need to consider the funds available to you, the fees associated with each investment platform, and potentially how easily you can use their website or app.
Read more: Best junior stocks and shares Isas
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What are the alternatives to a junior Isa?
As mentioned above, a junior stocks and shares Isa or a standard savings account could be an alternative to a junior cash Isa.
But one other option you may wish to consider is a junior SIPP, or self-invested pension plan. With these types of investments you’ll be savings for your child’s retirement. It means, under current government rules, they’ll only be able to access their money when they’re in their late 50’s.
A junior SIPP could be a great idea if you’re specifically saving for this goal, and not something else like a house deposit or a once in a lifetime trip abroad. It also comes with the tax advantages of saving into a standard SIPP. The only difference is that your contributions are limited to £3,600.
Otherwise, children savings accounts are also an option. However, they are taxed in the same way as a standard savings account. Still, with some banks and building societies offering easy access and regular savings accounts they can be a great way to teach your children the value of money and a good savings habit.
Read more: Children’s pensions – should you start one?
What if I have a Child Trust Fund?
Before launching the Junior Isa, the government implemented a savings initiative called the Child Trust Fund (CTF). It worked similarly to a Junior Isa, allowing you to deposit up to £9,000 a year tax-efficiently into a savings account for your child.
If you currently have a CTF you won’t be allowed to open a Junior Isa. Instead, you must transfer your funds across to your new Isa provider.
FAQs
How do I open a junior Isa?
Children between the ages of 16 and 17 can open their own Isa while younger applicants will need the permission of their parents or suitable guardian. When applying your provider will need to know the child’s address.
How do I deposit money into a junior Isa?
Some platforms only accept contributions from a “regular contact”. This will likely be the child’s parent or legal guardian who can deposit money into the junior Isa through a variety of ways, such as a debit card payment or BACS transfer. If you’re someone else who wants to make a once-off contribution, like a relative, you could arrange this deposit with the child’s parent or legal guardian. Some platforms however, like Hargreaves Lansdown, allow you to contribute if you’re not the “registered contact”.
How many junior Isas can I have?
While Isa rules have recently changed, children can only have two junior Isas – one cash and one stocks and shares variant. This means if your child already has a junior cash Isa with another provider, you’ll need to close the account and transfer your funds to the new provider.
Important information
Some of the products promoted are from our affiliate partners from whom we receive compensation. While we aim to feature some of the best products available, we cannot review every product on the market.
