Children’s savings: Starting their financial future early

Many parents and carers want to give children a solid financial base, yet feel unsure where to begin. The UK tax system offers several wrappers and allowances designed for minors, each with different rules on access, tax treatment and contribution levels.

Saving for a child is not just about handing over a lump sum at 18. It can reduce student debt, fund a first driving lesson, provide a house-deposit boost or even kick-start a pension. Starting early means more time for interest, dividends and tax relief to compound and for annual allowances – such as the Junior ISA limit – to be used before they fall away at each 5 April.

This guide explains the main wrappers and figures that apply in 2025/26, shows how different goals match different accounts, and outlines the ways our firm can lighten the administrative load. We hope it gives you a clear starting point. If a particular option catches your eye, please get in touch and we will set the wheels in motion.

Why early saving matters

Saving early makes full use of allowances that reset each 5 April and allows compound growth to work for many years.

Junior ISAs – the primary tax-free wrapper

Point to rememberRule for 2025/26What this means in practice
Annual subscription limit£9,000 per childYou can divide the allowance between cash and stocks & shares accounts.
AccessLocked until the child’s 18th birthdayAt 18 the account turns into an adult ISA and the child gains full control.
OwnershipThe child owns the fundsA parent or guardian manages the account until the child turns 16.
Tax treatmentInterest, dividends and gains are completely tax freeThey do not affect your own allowances.

What we do for you

Child Trust Funds – review or transfer

Children born between 1 September 2002 and 2 January 2011 may still hold a Child Trust Fund (CTF). However, they cannot hold both a CTF and a Junior ISA at the same time. If you wish to switch to a Junior ISA, the CTF must be transferred first – but this doesn’t use up the £9,000 JISA subscription limit, meaning you can add fresh funds after the transfer.

HMRC estimates that over 670,000 young adults have not yet claimed mature CTFs, with an average value of about £2,000.

How we can help

  1. Trace forgotten accounts – we can guide you through HMRC’s online tracing tool.
  2. Compare fees and returns – many legacy CTFs carry higher charges than modern JISAs.
  3. Transfer where sensible – a CTF can move into a JISA without using the receiving JISA’s £9,000 limit, allowing up to £18,000 of new tax-free funding in the same year (transfer first, then add fresh money).

Children’s savings accounts – simple, flexible, taxable

A standard children’s savings account at a bank or building society pays interest outside the ISA system.

With easy-access children’s savings rates of roughly 4-5% AER, you reach the £100 threshold at balances of £2,000-£2,500. If you plan to save more than that, a JISA or Premium Bonds usually suits better.

Premium Bonds – prize-based saving

Point to rememberFigure for 2025/26
Maximum holding£50,000 per child
Prize fund rate (April 2025)3.8% tax-free
AccessYou can cash in bonds at any time until the child turns 16

Premium Bonds suit families that have already filled the £9,000 JISA allowance but still wish to put aside money tax free. Returns are not guaranteed, yet the chance of a prize appeals to many children and parents alike.

Junior SIPPs – retirement saving from birth

Point to rememberRule for 2025/26
Net contribution limit£2,880 per child
Tax relief added£720 (20%)
Total invested£3,600
AccessNormally age 57 (expected to rise)

The government adds basic-rate tax relief even though the child has no earnings, so £2,880 paid in becomes £3,600 straightaway. The very long lock-in means a junior pension should sit alongside, not instead of, vehicles that support university costs or a first home. It is common practice for grandparents with surplus income to use junior SIPPs to pass on wealth without starting the seven-year inheritance tax clock, provided contributions come from normal income and leave the donor’s lifestyle unchanged.

2025/26 allowances at a glance

Allowance or limit2025/26 figure
Junior ISA subscription£9,000
Child trust fund subscription£9,000
Premium Bonds holding£50,000
Junior SIPP gross contribution£3,600 (£2,880 net)
Personal allowance£12,570
Starting-rate band for savingsUp to £5,000 interest
Parental settlement threshold£100 interest per parent
Inheritance tax annual gift exemption£3,000 (plus last year’s unused amount)

Tax points to watch

  1. £100 parental interest rule – monitor non-ISA accounts each January when banks issue annual statements.
  2. Frozen personal allowance – the allowance stays at £12,570 until 2028, so higher interest rates may push children with large balances into tax sooner than expected.
  3. Student finance – large sums held in a child’s name count towards assessed income for maintenance loans in England.
  4. Investment risk – stocks & shares JISAs and junior SIPPs can fall in value. The Financial Services Compensation Scheme covers up to £85,000 per firm.
    Universal credit interactions – savings in a child’s name usually do not affect parents’ entitlement, but income generated can. If this applies to you, let us know and we will arrange specialist advice.

Six practical steps to take now

  1. Check what already exists: Does your child have a JISA or a CTF? We can confirm this for you.
  2. Clarify the goal: Short-term spending at 18, a first-home deposit or retirement savings will lead to different choices.
  3. Use allowances in order: JISA, Premium Bonds, children’s savings account, then junior pension.
  4. Set up regular payments: Most providers accept £25 a month; direct debits remove hassle.
  5. Review yearly: At the start of each tax year we will remind you to check interest rates and fund performance.
  6. Include the child: Show them statements and explain how interest works to build financial awareness early.

 

How we help you

Next steps

Putting money aside for children may feel like one more task on an already long parental to-do list, yet it is one of the few actions that can deliver three wins at once: a financial head start for the child, efficient use of annual tax allowances and peace of mind for the wider family. By acting now you capture the 2025/26 limits in full and give each pound more time to grow before the child needs it.

Our team is here to make the process straightforward. We will recommend suitable providers, complete the forms, record gifts for inheritance tax purposes and remind you when reviews are due. Whether you prefer the certainty of a cash JISA, the excitement of Premium Bonds or the long-term boost of a junior pension, we can fit the choice to your goals and budget.