There are three main ways to save for a child: a children’s savings account, a Junior ISA, and Premium Bonds. The right one depends on when the money will be needed and who should control it. Whichever you choose, one tax rule matters if the money comes from a parent.
The options compared
| Children’s savings account | Junior ISA | Premium Bonds | |
|---|---|---|---|
| Returns | Interest, taxable (usually covered by the child’s allowances) | Cash: tax-free interest. Stocks and shares: tax-free growth, which can go down as well as up | Tax-free prizes instead of interest |
| Access | Depends on the account | Locked until 18 | Can be cashed in |
| Limit | Set by the account | £9,000 a tax year in total, from anyone | £50,000 per person |
| Money from parents | The parental £100 rule applies | The £100 rule doesn’t apply | Prizes aren’t interest |
Children’s savings accounts
A children’s savings account is held in the child’s name. Depending on the account, a parent or guardian runs it until the child is old enough to manage it, and money can be withdrawn for the child before they’re 18. Accounts can be easy access, fixed or regular savers, like adult accounts; compare the rate against the average for the same type of adult account (best savings accounts).
Junior ISAs
A Junior ISA is a tax-free account for a child under 18 living in the UK. Anyone can pay in, up to £9,000 a tax year in total; the money belongs to the child, who can take control of the account at 16 and withdraw it at 18, when it becomes an adult ISA.- A child can have one cash Junior ISA and one stocks and shares Junior ISA.
- Only a parent or guardian with parental responsibility can open one for a child under 16; children aged 16 and 17 can open their own.
- A child can't have a Junior ISA and a Child Trust Fund: transfer the Child Trust Fund into the Junior ISA.
The details, including how to choose between cash and stocks and shares, are in our Junior ISA guide.
Premium Bonds
You can buy Premium Bonds as a gift for a child under 16, and a nominated parent or guardian manages them. Premium Bonds don’t pay interest: they’re entered in a monthly draw for tax-free prizes, and a child can hold up to £50,000. See Premium Bonds for how the prize rate compares with savings rates.
Tax on a child’s savings
There's usually no tax on a child's savings, but if money a parent gave the child earns more than £100 of interest in a tax year, HMRC must be told and the parent pays tax on all of that interest if it takes them over their own Personal Savings Allowance. The limit doesn't apply to money from grandparents, other relatives or friends, or to a Junior ISA or Child Trust Fund.- Money given by a parent that earns the child more than £100 of interest in a tax year must be reported to HMRC.
- The parent then pays tax on all of that interest if it's above their own Personal Savings Allowance.
- The limit doesn't apply to money from grandparents, other relatives or friends.
- It doesn't apply to money in a Junior ISA or Child Trust Fund.
Example. A parent gives their child £5,000, and it earns 4% a year: £200 of interest. That’s more than £100, so HMRC must be told, and if the interest takes the parent over their own Personal Savings Allowance, the parent pays tax on all £200. The same £5,000 from a grandparent, or in a Junior ISA, wouldn’t be affected.
A child also has their own Personal Allowance like an adult: you must tell HMRC if a child’s income goes over it, for example from a trust, and the child pays the tax.
Choosing
- For a first home, university or a start in adult life, a Junior ISA keeps the money safe from being spent until 18, and tax-free. Remember that at 18 the money is the child’s to use as they choose.
- For costs before 18 (a school trip, a first car at 17), use a children’s savings account.
- If parents are giving large sums, keep the parental £100 rule in mind: a Junior ISA avoids it.
Related guides
- Savings accounts guide: the account types, average rates, tax and protection in one place
- Junior ISA guide: cash and stocks and shares Junior ISAs in detail
- Child Trust Funds at 18: what happens when a Child Trust Fund matures
- Personal Savings Allowance: how much interest is tax-free for adults