Saving for your children's future
Junior ISAs, junior pensions and the £100 rule — how to give children a tax-free head start and avoid the traps.
Start early enough and the tax system is remarkably generous to children — but it's also dotted with traps that can quietly hand the bill back to you, the parent. Here's how to give a child a tax-free head start, and which account suits which goal.
The Junior ISA
The Junior ISA (JISA) is the workhorse of children's saving. You can put in up to £9,000 this tax year, in cash or stocks and shares, and everything inside grows free of tax on interest, dividends and capital gains. A parent or guardian opens it, but anyone — grandparents, godparents, friends — can pay in. The money is locked until the child turns 18, when it becomes their own adult ISA.
A pension from birth
It feels absurd to open a pension for a baby, but the maths is extraordinary. You can pay £2,880 into a child's pension each year and HMRC adds 20% basic-rate relief — turning it into £3,600 gross— even though the child pays no tax. With 50+ years to compound before they can touch it, modest contributions in childhood can become one of the largest single assets they ever own. The trade-off, of course, is that it's locked until pension age.
The £100 parental rule
A child's own tax allowances
Children are taxpayers in their own right, with the full set of allowances. In 2025-26 a child with little or no earned income can receive a striking amount of savings interest tax-free:
| Allowance | Amount |
|---|---|
| Personal Allowance | £12,570 |
| Starting rate for savings | £5,000 |
| Personal Savings Allowance | £1,000 |
| Potential tax-free savings interest | ~£18,570 |
They also get the £3,000 capital gains annual exempt amount and the £500 dividend allowance. The catch is the £100 parental rule above — these big allowances are most useful for money gifted by people other than the parents, or held inside a JISA.
Bare trusts and designated accounts
To invest beyond the JISA limit, families often use a bare trust or a designated account. The money is legally the child's, so gains and income use the child's allowances (still subject to the £100 rule for parental cash). The flip side: it's irrevocable, and the child takes full control at 18 (16 in Scotland) — whether you think they're ready or not.
Matching the account to the goal
- University or a first car (≤18-year horizon): a stocks-and-shares JISA for growth, shifting to cash as 18 approaches.
- A first home: once they're 18, a Lifetime ISA adds a 25% government bonus on up to £4,000 a year toward a first property.
- Their retirement: a child's pension, for the unbeatable compounding.
- Short-term safety: cash, in a grandparent-funded account to sidestep the £100 rule.
Sources & further reading
This guide is general information, not personal tax advice, and reflects the rules we believe to apply as at June 2026 — rates and thresholds change. Always check your own figures against HMRC and consider a qualified adviser before acting. You remain responsible for the accuracy of anything you file.
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