Junior ISA (JISA)
A Junior ISA is a tax-free savings wrapper for children under 18. A parent or guardian opens the account, but anyone can pay into it. All growth inside the JISA is free from Income Tax and Capital Gains Tax. No tax return is needed. The child cannot touch the money until they turn 18, at which point it converts to an adult ISA and belongs to them.
- Annual limit: £9,000 per tax year (2026/27). This is the combined limit across cash and stocks & shares JISAs.
- Tax: Zero. No tax on interest, dividends, or capital gains inside the wrapper.
- Access: Locked until the child turns 18. At 18, the account converts to an adult ISA and the child can withdraw freely.
- Who can open: Only a parent or legal guardian. Others can contribute once it is open.
Bare Trust
A bare trust holds assets for a named beneficiary (the child). The person setting it up (the settlor) transfers money or investments into the trust, and a trustee manages it until the child reaches 18. At 18 (16 in Scotland), the child has the legal right to demand everything in the trust.
- Annual limit: None. You can put in as much as you want each year.
- Tax: Income and gains are taxed as the child's. Children have their own Personal Allowance (£12,570), a £1,000 Personal Savings Allowance (as a non-taxpayer), and a £3,000 Capital Gains Allowance. Most children will owe nothing.
- Access: Trustees can use the money for the child's benefit before 18 (e.g. school fees). At 18, the child takes full control.
- Who can open: Anyone. Grandparents, parents, or any other person.
The £100 Parent Trap Rule
This is the single biggest reason parents should be careful with bare trusts. If a parent puts money into a bare trust (or any non-ISA account) for their own minor child, and the income generated exceeds £100 per year, all the income is taxed on the parent, not the child.
At current savings rates, it does not take much to trip this threshold. £2,500 in a cash account paying 4% interest generates £100 a year. Go above that and the full amount of interest (not just the excess over £100) is added to the parent's taxable income.
⚠️ Grandparents are exempt. The £100 rule only applies to parental gifts. If a grandparent, aunt, uncle, or family friend puts money into a bare trust for a child, the income stays taxed on the child. This is why bare trusts are far more attractive when funded by grandparents.
The rule does not apply to Junior ISAs at all. Inside a JISA, income and gains are tax-free regardless of who contributed. Parents can put the full £9,000 into a JISA every year with no tax consequences.
Side-by-Side Comparison
| Feature | Junior ISA | Bare Trust |
|---|---|---|
| Annual contribution limit | £9,000 | No limit |
| Tax on income/gains | None (tax-free wrapper) | Taxed on child (usually nil) |
| £100 parent trap | Does not apply | Applies to parental gifts |
| Child gets access at | 18 | 18 (16 in Scotland) |
| Early access for child's benefit | No (locked until 18) | Yes (trustee can pay for child's needs) |
| Who can open | Parent or guardian only | Anyone |
| Tax return needed | No | Only if income exceeds child's allowances |
| Investment options | Cash or stocks & shares | Any asset (shares, property, cash) |
Worked Example: £9,000/Year Over 10 Years
Grandma Margaret wants to invest £9,000 per year for her granddaughter, starting at birth. She plans to invest for 10 years and then stop contributing, letting the pot grow until age 18. Assumed annual growth: 6% (a typical long-term equities assumption after charges).
Junior ISA route: After 10 years of £9,000 contributions, the pot has grown to roughly £125,400. Left untouched for another 8 years at 6%, it reaches approximately £199,800 at age 18. All gains are completely tax-free.
Bare trust route: The same contributions and growth produce the same gross figure. But dividends and gains are taxed on the child each year. Since Margaret is a grandparent (not a parent), the £100 rule does not apply. The child's £1,000 dividend allowance and £3,000 CGT allowance cover most annual gains in the early years. In later years, as the pot grows, some gains may become taxable if the child has no other way to use their allowances. In practice, the net difference is small for a grandparent-funded trust because the child's own allowances do most of the heavy lifting.
Both routes produce roughly £200,000 by age 18. The JISA is simpler. The bare trust gives more flexibility (and no £9,000 cap, so Margaret could put in more if she wanted).
Growth projections assume 6% annual returns after charges. Actual returns will vary. Past performance is not a guide to future results.
Growth Projection: £9,000/Year at 6%
| Child's Age | Total Contributed | Estimated Value (6%) |
|---|---|---|
| 1 | £9,000 | £9,540 |
| 3 | £27,000 | £30,300 |
| 5 | £45,000 | £53,700 |
| 10 | £90,000 | £125,400 |
| 14 | £90,000 | £158,300 |
| 18 | £90,000 | £199,800 |
Contributions stop at age 10. From age 11 onward, the pot grows without new money going in. Figures are rounded and assume no withdrawals.
What Happens at 18
Junior ISA at 18
The JISA automatically converts into an adult ISA. The child becomes the sole account holder. They can withdraw all or part of the money, transfer it to another ISA provider, or leave it invested. No tax is due.
You cannot prevent the child from accessing the money. Once they turn 18, it is legally theirs.
Bare Trust at 18
The child can demand the trust assets from the trustees. In England and Wales this happens at 18. In Scotland, the age is 16. The trustees must hand everything over if the child asks.
If the child does not ask, the trustees can continue managing the assets. But the child has the legal right to demand them at any point from 18 onward.
When Each One Makes Sense
Use a Junior ISA when:
- • You are a parent contributing your own money
- • You want zero tax paperwork
- • £9,000 per year is enough
- • You don't need to access the money before the child turns 18
Use a Bare Trust when:
- • A grandparent or other relative is the main funder (no £100 trap)
- • You want to contribute more than £9,000 per year
- • You may need to use the money for the child before 18 (e.g. school fees)
- • You want to hold assets other than cash or listed investments
Edge Cases
- Both parents contribute to a bare trust: Each parent's contributions are tracked separately for the £100 rule. If mum's contributions generate £80 of income and dad's generate £90, neither parent exceeds £100, so neither pays tax. If either crosses £100, that parent pays tax on the full amount from their gifts.
- Divorced parents: Both parents retain the £100 rule individually. A new step-parent does not count as a parent for this rule.
- Child has earned income: If a child earns their own money (e.g. a part-time job), that income is separate and does not affect the tax treatment of JISA or bare trust income.
- Inheritance Tax: Gifts into a bare trust count as Potentially Exempt Transfers for IHT. If the grandparent survives 7 years after the gift, the transfer falls out of their estate completely. Annual gifts of up to £3,000 per person are exempt regardless.
Common Questions
Can grandparents contribute to a Junior ISA?
Yes. Anyone can contribute to a child's Junior ISA, including grandparents, aunts, uncles, and family friends. Only a parent or legal guardian can open the account, but once it exists, anyone can pay in. All contributions count toward the single £9,000 annual limit across all contributors.
What is the JISA limit for 2026/27?
The Junior ISA annual subscription limit is £9,000 for the 2026/27 tax year. This is the combined limit across all Junior ISAs the child holds (one cash JISA and one stocks and shares JISA). If the child has both types, the total paid into both cannot exceed £9,000.
Can a child have both a Junior ISA and a Bare Trust?
Yes. There is no rule preventing a child from having both. A grandparent might contribute to a bare trust while the parents contribute to a Junior ISA. The two accounts are completely independent with different tax rules and access arrangements.
What happens if my child wastes the money at 18?
With a Junior ISA, the money becomes theirs at 18 with no restrictions. You have no legal power to stop them spending it. With a bare trust, the child can also demand the money at 18 (16 in Scotland). Neither vehicle lets you keep control past these ages. If this worries you, a discretionary trust gives more control but has a much less favourable tax treatment and higher costs to set up.
Does the £100 parent trap apply to Junior ISAs?
No. The £100 rule only applies to bare trusts and other non-ISA accounts. Inside a Junior ISA, all income and gains are completely tax-free regardless of who contributed. This is one of the main reasons parents should prefer JISAs over bare trusts for their own contributions.