Junior ISA vs Bare Trust:
Saving for the Next Generation

Building a nest egg for children or grandchildren? Choosing the right account can save thousands in tax.

Junior ISA (JISA)

A tax-free wrapper for children under 18.

  • Limit: Save up to £9,000 per tax year (2024/25).
  • Tax: No tax on interest, dividends, or capital gains.
  • Access: The money is locked away until the child turns 18. At 18, it legally belongs to them to spend as they wish.

Bare Trust

A simple trust where assets are held for a beneficiary (the child).

  • Limit: No annual limit on contributions.
  • Tax: Income and gains are taxed on the child. Since children have their own Personal Allowance (£12,570) and Capital Gains Allowance (£3,000), there is often no tax to pay.
  • Access: The child can demand the money at 18 (16 in Scotland).

⚠️ Parent Trap: If a parent gifts money to their minor child in a Bare Trust and it generates more than £100 interest/year, the tax falls back on the parent. Grandparents are exempt from this rule!

Which Should You Choose?

Choose Junior ISA if:

  • • You are a parent (avoids the £100 interest trap).
  • • You want simplicity and zero tax reporting.
  • • You are happy with the £9,000 annual limit.

Choose Bare Trust if:

  • • You are a grandparent (very tax-efficient).
  • • You want to contribute more than £9,000/year.
  • • You want to pay for school fees (trustees can use funds for the child's benefit before 18).