Junior ISA saving rates raised 2.5% from April 2019

The annual saving limit for Junior ISAs and child trust funds (CTF) is set to rise 2.5% from 1 April for the estimated six million child account savers

There will be a small adjustment to the annual CTF and Junior ISA savings limit with a £108 rise from £4,260 to £4,368 from 6 April 2019, equivalent to 2.5%. The interest and gains received on money saved in a CTF and Junior ISA is taxfree as per standard ISA rules.

An estimated 907,000 Junior ISAs were paid into during 2017-18 tax year.

The savings vehicle was originally designed to supports savings for children, and CTFs and Junior ISAs are held by around six million children. A study in 2018 by Scottish Friendly suggested that up to 1.5 million CTFs were unclaimed as parents had lost track of them.

CTFs were introduced in 2002 by Gordon Brown when he was Chancellor but were abolished in 2011 by the coalition government following early criticism about their complexity, and they were replaced by Junior ISAs, which offer better returns for savers and are a more straightforward saving tool.

As part of the initial scheme, every account was credited with up to £500 free from the government, encouraging parents, relatives and friends to save tax-efficiently each year to boost their child’s savings.

Under CTF rules, current holders can continue to add up to £4,260 a year to a CTF account. The money belongs to the child and they can only take it out when they reach 18, although they can manage the account from the age of 16.

CTF accounts can also be transferred to a Junior ISA account at any time.

The account rules for CTF, including the amount that can be paid into an account are set out in the Child Trust Funds Regulations 2014 (SI 1450/2004) (CTF Regulations). The interest rate rise was announced at Autumn Budget 2018.

The CTF Regulations will be amended by the Child Trust Fund (Amendment) Regulations 2019 to increase the amount that can be paid into a CTF each year from £4,260 to £4,368.

HMRC states that this measure ‘is expected to have a negligible impact on the approximately 70 approved CTF providers. One-off costs include familiarisation with the new CTF subscription limit from 6 April 2019 and adjusting their accounting systems to take account of the new limit. It is not expected that there will be any ongoing costs’.

HMRC policy paper, Increasing the Junior Individual Savings Account subscription limit for 2019 to 2020

HMRC policy paper, Increasing the Child Trust Fund annual subscription limit for 2019 to 2020

Report by Sara White


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