A Junior ISA (or JISA) is a tax-efficient investment account for people under 18. Only a parent or legal guardian can open a Junior ISA for their child. However, other people will be able to pay into the account. Currently, £9,000 is the Junior ISA allowance per tax year.
These products can either be:
- A cash ISA, which earns a set rate agreed upon at the account's opening
- A stocks and shares ISA where investments in stocks, funds or bonds are made to achieve an uncapped return.
One of the biggest attractions of JISAs is the tax rules. No tax is liable on any Junior ISA investment that earns dividend income or makes a gain when sold.
When the child turns 18, they can access the funds. They can then use it according to their circumstances and wants. So while grandparents or parents may want them to use the money to go towards university or a house deposit, the 18-year-old may have different ideas!
What you need to know about the Hargreaves Lansdown Junior stocks and shares ISA
Hargreaves Lansdown has long been a popular ISA provider for customers happy to manage their investments or purchase other investment options, such as exchange-traded funds, for a JISA. Here are some more things worth knowing about this product.
Stocks and shares vs cash
The most important thing to know about Hargreaves Lansdown ISAs is that they only offer a stocks and shares ISA and not a cash ISA. It means you have to buy the child's investments to see the money grow instead of simply earning an interest rate set out from the start, as you would with a Cash ISA.
HL Junior ISA charges
As of 2022, the annual charge you will incur when opening one of these accounts is 0.45%. The dealing charges you may face when trading depend on the chosen investments.
At the moment, account holders can choose from over 3,000 funds, UK and overseas shares, investment trusts, bonds and exchange-traded funds. It means you can build a diversified portfolio according to your risk tolerance and profile.
Hargreaves Lansdown offers many other types of investment products, from SIPPs to General Investment accounts, amongst others. If you open an ISA for your child or grandchild, you can link them to your Hargreaves Lansdown accounts so you can manage all your money from the same platform.
Hargreaves Lansdown has a reputable research arm which means it can provide investment ideas from its expert analysts to its customers. So you could benefit from those ideas, which may highlight an investment you may have otherwise overlooked.
Opening a Hargreaves Lansdown Junior ISA
The tax benefits of opening a Junior ISA are not to be sniffed at. It's a much-misunderstood fact that a child UK resident does not pay tax. They do, but they rarely meet the personal tax allowance limits to cause them to pay a tax bill.
With a Junior ISA, they will never be subject to capital gains or the personal savings limit that other investments can have to pay. Instead, with each dividend they receive and every time they sell a FTSE stock that has gone up in price, they'll be shielded from having to pay tax.
Over the 18 years you can have an ISA open for a child, the cumulative effect of that income and growth can add up to a considerable amount.