Saving for Children

Whether it’s for university, driving lessons or their first home, saving for your child’s future is a great way to give them a helping hand as they approach adulthood.

What is a Cash ISA?

Just like a savings account, a Cash ISA (Individual Savings Account) is a safe, secure way to store your money. The only difference is that any interest you earn on your savings is tax-free.

What are the benefits of an ISA?

There are many reasons to opt for a Cash ISA over alternative savings accounts. Not the least of these, is that they’re a great way of saving for your future. Other benefits include:

  • Currently, all basic rate taxpayers can earn £1,000 of tax-free savings interest per year, under the Personal Savings Allowance (PSA). However, there is no guarantee that this won’t change in the future. With ISAs, you’re guaranteed your savings will always be tax-free. Investing your allowance each year means you can grow your savings without having to pay any tax.
  • If you were to opt for an alternative regular savers account and savings interest rates increased, the money you’d saved may tip you over the Personal Savings Allowance limit.
  • Some types of Cash ISA come with the added benefit of government boosting. For example, the 25% government bonuses offered with Help to Buy ISAs and Lifetime ISAs. 

Are ISAs tax-free?

Yes, with a Cash ISA you can rest assured your savings are not only tax-free, but safe from changing regulations.

The only time when a Cash ISA isn’t exempt from tax is if you are aged 16 or 17 years old, and the money in your account is a gift from a parent. If this is the case, your parents may have to pay tax if parental settlement rules apply.

Cash ISA rules

  • To be eligible for a Cash ISA, you must be aged 16 or over and a UK resident. The only exception to this is in the case of Lifetime ISAs, that require you to be 18 years old
  • You can only open one Cash ISA per year
  • You have a single ISA allowance each year, which you can divide between a Cash ISA, a stocks and shares ISA, an Innovative Finance ISA and/or a Lifetime ISA. With a Lifetime ISA, the maximum allowance is £4,000 each year, meaning you have up to £16,000 to split between the other types

How much can I put in an ISA?

The total amount you can put into a Cash ISA for the 18/19 tax year is £20,000. This is known as the ISA allowance and is available to every person over 16 in the UK. You have the choice of using up the maximum allowance in one account, or splitting between the different types of ISA products.

Any interest your ISA earns doesn’t count towards your Personal Savings Allowance.

When is the ISA deadline?

The ISA deadline is midnight on 5th April each year; this is the end of the tax year. Any unused allowance doesn’t roll over into the new tax year, so you should try to make the most of your allowance before the deadline comes around. For more information on the ISA deadline, refer to our ISA deadline guide.

What are the different types of Cash ISA?

There are a number of different Cash ISAs available to help you achieve your savings goals. Whether you’re saving for your first home or setting up a nest egg for your golden years, there’s an option to suit you.

Fixed Rate ISAs

A Fixed Rate ISA pays a guaranteed amount of interest for a set period of time, from six months to five years. Though withdrawals are permitted, they’re subject to penalties. Consequently, a Fixed Rate ISA is better suited to those who won’t need immediate access to their savings.

Help to Buy ISAs

A Help to Buy ISA is a government scheme designed to help you save for a mortgage deposit on your first home. To qualify, you can’t own a property anywhere in the world.

You can save up to £200 a month in a Help to Buy ISA, and they come with the added bonus of government contributions. In this case, your savings could be boosted by 25%. The minimum government bonus is £400, so you will have to have saved at least £1,600 to qualify for a government bonus.Please note, Help to Buy ISAs are due to be withdrawn in November 2019.

Lifetime ISAs

A Lifetime ISA is a tax-free savings account that also offers a government bonus of 25% on top of the money you put in, up to a maximum of £1,000 a year. With a Lifetime ISA, you can deposit as much as £4,000 per year until the age of 50. Lifetime ISAs can only be opened and funded by those aged 18 to 39.

Junior ISAs

Junior ISAs are tax-efficient ways of saving for your little one’s future. You must be 16 or over and a UK resident to open a Junior ISA on behalf of a child, or be a child aged 16 to 18 to open one for yourself. The Junior ISA allowance for 2019/20 is £4,368.

Find everything you need to know about Junior ISAs here.

Refer to our Cash ISA page to discover the full range of ISAs available with Newcastle Building Society.

How many ISAs can I have?

You can have multiple ISAs at one time, but you can only open or pay into one of each type of ISA using your £20,000 allowance. 

Though you can only open one Cash ISA each tax year, there’s no limit to the number of ISA transfers you can make, should you spot a better interest rate with another provider. However, with Newcastle Building Society, you can open multiple cash ISAs using our CustomISA service. You can find more about that here.

What happens if I take money out of my ISA?

Withdrawals are permitted from most ISAs. However, if you make a withdrawal from a Fixed Rate ISA, you will be subject to a penalty in the form of a loss of interest on your savings.

If you think you will need access to your savings quickly, then you may be best suited to an ISA that doesn’t penalise withdrawals.

In relation to the Lifetime ISA a penalty of 25% of the withdrawal amount will be deducted unless the funds are being used for either:

  • Buying your first house (the account must have been held for a minimum 12 months)
  • You reach the age of 60
  • You are diagnosed with a terminal illness and have less than 12 months to live

Can I transfer my ISA to another provider?

You are permitted to unlimited transfers each tax year. However, you should always check that your new provider accepts transfers, as not all banks and building societies are obliged to do so

Avoid withdrawing money from your ISA yourself, as your savings may lose their tax-free status!

There are a number of reasons you may want to transfer to a new provider. For example, if you’ve spotted better rates elsewhere. Read our complete guide to the ISA transfer process for more information.

Can I inherit an ISA?

If your spouse or civil partner passes away, you will be eligible to receive an Inheritance ISA Allowance. Read more information about inheritance tax allowance in our helpful inheritance tax allowance guide.

Applying for a Cash ISA with Newcastle Building Society

If you'd like to apply for a Cash ISA at Newcastle Building Society, the process is really simple. We also accept ISA transfers, including Lifetime ISAs. To get the ball rolling, simply browse our Cash ISA product range or contact us.​

Below, we’ve put together a short guide on saving for kids. From where to start to the different accounts available, you will find all you need to start saving for your child’s future.

 

Getting started with savings for children

Setting money aside for savings may seem daunting, particularly if you’re already feeling the strain of raising your children.

However, putting as little as £20 a month aside for 18 years can accumulate to £4,320. This is a big help to any student, budding driver or even a first time buyer!

 

What is a Children's savings account?

Children’s savings accounts work much like adult ones. Though there are a number of different options, they are all simple ways to set money aside for a rainy day.

With some children’s savings accounts, children can manage their finances from as young as seven years old. This equips little ones with the skills to responsibly handle their money; skills that are sure to stay with them as they grow up and achieve financial independence.

To get started, you will need to choose a savings account. See below the different accounts available, to find the right one for your family.

 

What are the different savings accounts available?

Junior ISAs

A Junior Individual Savings Account (ISA) is a tax-free way to save money for your child’s future. Any child under 18 is eligible for a Junior ISA.

When your little one turns 16, they will be able to start managing their account themselves. However, they won’t be able to withdraw money until they are 18 years old.

There are two types of Junior ISA:

  • Junior Cash ISA – Put simply, a cash ISA is a tax-free savings account. The interest rates will depend on your bank or building society. There are plenty of benefits of opting for a cash ISA, with few drawbacks. The amount paid into a Junior ISA can’t exceed £4,368 for the current tax year.
  • Junior Stocks and Shares –With an ISA, you can split your tax-free allowance between a cash ISA and share and stock investments.

If you think a Junior ISA is the best option for your child, you will need to choose the type that’s best for you; whether this is a cash ISA, stocks and shares or both! Once you have an idea of the kind of ISA you’re interested in, you simply need to contact your bank or building society to apply.  

Here at Newcastle Building Society, you can open a Junior ISA with as little as £1, so saving for your child’s future couldn’t be easier. For more information on Junior ISAs and savings for children with the Newcastle, pop into your nearest branch or read our Junior ISA guide.

Children’s Regular Savings Accounts

Unlike ISAs that allow you to deposit money as and when you choose, regular savings accounts require you to make regular contributions. Though this may seem like a big commitment, this makes regular savers ideal if you’re saving for something specific.

Many regular savers offer competitive interest rates, allowing your money to work for you. The interest rates on regular savers are also a particularly good incentive when encouraging children to save their pocket money on a regular basis.

Most children’s regular savings accounts run for a set period of time, such as a year. If you choose to withdraw from your account within the set time period, this can reduce the interest you’ll get on your savings.

With the Newcastle, our Children’s Regular Savers have no time limit and you can set up an easy-access account with as little as £1, so you can build your nest egg at a pace that suits you.

Opting for a children’s regular saver is a great way to motivate your child to use their money responsibly. With our Children’s Regular Saver (0-10 years) and our Young Regular Saver (11-15 years), there’s an account to suit your little ones, whatever stage of life they’re in. Visit your local branch to discuss saving for your kids today.

 

Are Children's saving accounts taxed?

Typically, you aren’t expected to pay tax on children’s savings accounts.

However, if your child earns more than £100 in interest, or any other investment income, the interest will be taxed. If this is the case, as the parent, you will be expected to pay.

The £100 tax-free limit doesn’t apply to money that’s gifted from grandparents, relatives and friends. Monetary gifts from anyone who isn’t a parent or legal guardian can earn up to £1,000 in tax-free interest.

Children’s savings are also exempt from tax if they’re in a Junior ISA or a Child Trust Fund.

Introducing saving to your child from a young age puts them in good stead for a future of responsible spending. We understand all parents want to give their little ones the best chances in life, so it’s important that you find the right savings account.

If you’d like to look into savings for your children, explore your options in person and book an appointment at your local Newcastle Building Society branch today.