20 September 2021

  • News

Looking to save tax-free for a child’s financial future?

Parents and grandparents always want to give their young ones the best start in life. But children seem to grow up so quickly and before you know it, they’ll need help with uni fees, their first car or a deposit on their own home. Do you have something in place for your little one?

A popular plan for children is the Junior ISA (JISA).

This plan must be opened by the child’s parents, but once opened, anyone can pay in (including grandparents). They tend to be flexible, accepting either regular or ad-hoc deposits such as birthday and Christmas monies. Once the monies are invested, the child can’t get their hands on the funds until they are at least 18.

You can contribute up to £9,000 into a JISA in the current tax year. If the child has a Child Trust Fund (CTF), these could also be transferred to a JISA.

The JISA value could be reduced if withdrawn during adverse market conditions, but money invested for five years or longer is guaranteed.

Tax treatment depends on individual circumstances and may be subject to change in the future.

Another often overlooked option for parents or grandparents is the Tax Exempt Savings Plan (TESP), a tax-free allowance in addition to the CTF and JISA.

The TESP is only available through friendly societies and provides a guaranteed final return (check with each provider to see what their guarantee is, some providers offer a guarantee for more than you’ll pay in), plus the prospect of added annual and final bonuses if the plan is held to maturity. These are regular savings plans ranging from £5 to £25 per month and can run for between 10 and 25 years.

If you surrender the plan before maturity (which is the term you select when first starting the plan), you may get back less than you have paid in.

Tax treatment depends on individual circumstances and may be subject to change in the future.

These are just a few ways to save tax-free for children, there are lots of options out there so be sure to do your research and pick the one that’s right for you.

This blog provides generic information and opinions of the writer and should not be relied upon for making investment decisions. No advice has been provided by Sheffield Mutual. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand. 

By Laura Staniland


Senior Marketing and Communications Specialist

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