What's that – a tax-free savings scheme for kids?
Exactly that. A Junior Individual Savings Account allows parents and grandparents to build up a decent nest egg for children on which they won't have to pay any tax.
But children don't pay tax on their savings?
Oh yes they do – if parents contribute to their accounts. If the subsequent interest earned is more than £100, then it is taxed as if it's the parents' interest. Putting cash into a Junior ISA saves that potential worry – and also saves the need to fill in an R85 form for HMRC to register an account as a child's.
It's good to save red tape. But won't low interest rates mean there won't be much to tax?
Imagine that you put £100 into an Junior ISA every month. After five years, that would tot up to £6,000. Even at today's low rates, that would still add up to £180 worth of interest.
So over the long term a JISA makes sense?
It does. Especially as, at 18, the child can switch to a standard ISA. If you had deposited £100 a month since birth, that'd be £20,600 plus interest to switch.
Why are you telling me about this now?
It's a year since Junior ISAs were launched, yet just 71,000 have been opened, while there are six million kids who are eligible to open one.