Children’s savings: Starting their financial future early
Price Mann • July 16, 2025
Children’s savings: Starting their financial future early
Giving your children a head start in life.
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
- 18-year-olds who receive even a modest lump sum are less likely to rely on expensive borrowing for university or early working life.
- HMRC data shows that 1.25m Junior ISA (JISA) subscriptions were made in 2022/23 and uptake continues to rise.
- With consumer price inflation at 3.5% in April 2025, many children will need larger deposits for rent or property by the time they reach adulthood.
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
| Points to remember | Rule for 2025/26 | What this means in practice |
|---|---|---|
| Annual subscription limit | £9,000 per child | You can divide the allowance between cash and stocks & shares accounts. |
| Access | Locked until the child’s 18th birthday | At 18 the account turns into an adult ISA and the child gains full control. |
| Ownership | The child owns the funds | A parent or guardian manages the account until the child turns 16. |
| Tax treatment | Interest, dividends and gains are completely tax free | They do not affect your own allowances. |
What we do for you
- We will check that total subscriptions across all JISAs stay within the £9,000 limit.
- We’ll point you towards cash JISA providers currently paying around 4% AER variable (rates correct June 2025) or low-cost stocks & shares platforms if you are comfortable with investment risk.
- From April 2024 the restriction on subscribing to multiple adult ISAs of the same type was removed – but this does not apply to Junior ISAs. Children are still limited to one cash JISA and one stocks & shares JISA per tax year, subject to the overall £9,000 limit.
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
- Trace forgotten accounts – we can guide you through HMRC’s online tracing tool.
- Compare fees and returns – many legacy CTFs carry higher charges than modern JISAs.
- 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.
- Personal allowance: £12,570 – applies to children as well as adults.
- Starting-rate band for savings: Up to £5,000 of interest can still be tax free if the child has little or no other income.
- Parental settlement rule: If a parent provides the capital and total annual interest for that child exceeds £100, the entire interest is taxed as the parent’s income. Gifts from grandparents or other relatives are not caught.
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 remember | Figure for 2025/26 |
|---|---|
| Maximum holding | £50,000 per child |
| Prize fund rate (April 2025) | 3.8% tax-free |
| Access | You 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 remember | Rule for 2025/26 |
|---|---|
| Net contribution limit | £2,880 per child |
| Tax relief added | £720 (20%) |
| Total invested | £3,600 |
| Access | Normally 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 limit | 2025/26 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 savings | Up 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
- £100 parental interest rule – monitor non-ISA accounts each January when banks issue annual statements.
- 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.
- Student finance – large sums held in a child’s name count towards assessed income for maintenance loans in England.
- 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
- Check what already exists: Does your child have a JISA or a CTF? We can confirm this for you.
- Clarify the goal: Short-term spending at 18, a first-home deposit or retirement savings will lead to different choices.
- Use allowances in order: JISA, Premium Bonds, children’s savings account, then junior pension.
- Set up regular payments: Most providers accept £25 a month; direct debits remove hassle.
- Review yearly: At the start of each tax year we will remind you to check interest rates and fund performance.
- Include the child: Show them statements and explain how interest works to build financial awareness early.
How we help you
- Compliance – we track contributions and alert you if you approach annual limits.
- Provider selection – we keep a current list of competitive cash JISA rates and low-cost investment platforms.
- Paperwork – we handle transfer forms if you move a CTF to a JISA or switch providers.
- Inheritance-tax planning – we record gifts and advise on using the £3,000 annual exemption and normal-expenditure rules.
- Tax returns – if non-ISA interest pushes you over your personal-savings allowance, we include it in your self assessment return.
- Updates – when HM Treasury announces changes we summarise what they mean for your family and suggest timely actions.
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.
If you would like to explore any of the ideas in this guide, please get in touch. A short conversation today could mean a much stronger financial footing for your child tomorrow.
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Managing risk in your investment portfolio Tips for a balanced investment approach. Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions. The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice. Start with a clear plan Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities. Set your risk level in advance: Ask yourself two questions. Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)? Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn. Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills. Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk. Diversification: Spread risk across assets, regions and issuers Diversification reduces the impact of any single holding. Practical ways to diversify include the following. Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash). Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk. Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure. Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk. A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole. Use tax wrappers to reduce avoidable tax and trading frictions Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax. ISAs (individual savings accounts) Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000. Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged). ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost. Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know. Pensions (workplace pension, personal pension/SIPP) Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible. Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26). Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income). Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100. Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension. Personal savings: Interest allowances Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA. Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band). Dividends and capital gains outside ISAs/pensions Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively. The annual capital gains tax (CGT) exempt amount , £3,000 for individuals (£1,500 for most trusts). CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26. CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July). Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable. Bonds and cash: Interest-rate and inflation considerations Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon. Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve. Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation. Control costs and product risk Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses. Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core. Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news. Rebalancing: Why, when and how Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended. Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs) Frequency: Review at least annually. Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative). Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances. Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order. Safeguard cash and investments with the right protections FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing). FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls. Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date. Currency risk: When to hedge For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds. Behavioural risks: Keep decisions steady Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include: automate contributions (regular monthly investing), which spreads entry points write down rules (what you will do if markets fall 10%, 20%, 30%) separate spending cash from investments so you do not sell at weak prices to fund short-term needs use portfolio “buckets” in retirement. Retirement planning: Sequence-of-returns risk and withdrawals If you are drawing an income from investments consider the following. Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls. Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer. Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them. Putting it together: A repeatable checklist Confirm goals and time horizons. Check emergency cash (3-6 months). Map your target asset allocation. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate. Keep costs low: Prefer broad index funds/ETFs. Set rebalancing rules: Annual review + thresholds. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes. Get in touch if: you are unsure how to set or maintain an asset allocation you plan to draw income and want to coordinate wrappers and tax bands you expect large one-off gains or dividends and want to plan disposals or contributions you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently you are considering more complex investments. Wrapping up Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational. Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades. If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most. Important information This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser. If you’d like advice on managing your portfolio, get in touch.
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