¿Te preocupa escog er la mejor opción de ahorro para un niño y no saber cómo afectan los impuestos, la propiedad legal o la herencia? If the decision is between a Junior ISA and Premium Bonds, this guide focuses only on those two options and explains the legal and tax differences in plain British English.
The guide uses up-to-date UK rules (indicative and current at time of writing) and links to primary sources for verification.
Key takeaways: what to know in one minute
- Junior ISAs are tax-efficient investment wrappers: interest, dividends and gains inside a Junior ISA are tax-free for the child and not subject to personal savings allowance rules.
- Premium Bonds prizes are tax-free for the winner: prizes are not taxable income and do not need reporting to HMRC unless received by an adult taxpayer as part of wider income rules. For children, prizes are generally tax-free, but legal ownership and gift rules matter.
- Control differs: a Junior ISA is controlled by the registered contact (usually a parent or guardian) until the child turns 16, but the child owns the assets at 18. Premium Bonds purchased for a child are owned by the purchaser unless explicitly held in the child's name — ownership affects inheritance and tax consequences.
- Contribution and holding limits vary: Junior ISA annual limit (2026) applies to cash and stocks & shares JISAs combined; Premium Bonds have a maximum holding per person and an overall NS&I limit for prize draw eligibility.
- Inheritance risk is higher with Premium Bonds if held by an adult: if Premium Bonds are held in a parent's name for a child, prizes and capital may form part of the parent's estate.
How Junior ISAs and Premium Bonds compare on tax treatment
This section concentrates on tax consequences specifically for children's savings.
Junior ISAs
- Tax status: Amounts held inside a Junior ISA grow free of UK income tax and Capital Gains Tax for the child. GOV.UK: Junior ISAs.
- Who benefits: The child (beneficial owner) receives the tax advantage when they can access the account at 18. The tax wrapper applies regardless of the child's other income.
- Reporting to HMRC: No need to declare Junior ISA growth or income separately while funds remain in the JISA; the child will not normally need to complete a tax return solely because of a JISA.
Premium Bonds
- Tax status: Prize winnings from Premium Bonds are not subject to UK income tax — they are paid tax-free by National Savings & Investments (NS&I). NS&I.
- Who benefits: The prize is treated as a tax-free receipt to the registered holder. For children, if the prize is in the child's name, it is tax-free for them. If an adult holds bonds on behalf of a child but they remain legally the adult's, that can have different estate and means-test effects.
- Reporting to HMRC: No routine reporting of Premium Bonds prizes is required, because prizes are not assessable income. However, if the prize is part of a larger tax context (e.g. a parent is considered to have received income for tax purposes) specialist advice should be sought.
How ISA income and Premium Bonds prizes are taxed in practical terms
- Dividend and interest inside a Junior ISA: No income tax or CGT for returns that remain within the JISA. Once withdrawn by the child at 18, normal personal allowance and tax rules apply to subsequent income.
- Premium Bonds prizes: Prizes are tax-free. NS&I does not deduct tax. There is no separate ‘imputed income’ calculation for tax purposes.
- Examples: If a Junior ISA generates £200 in dividends in a tax year, the child pays no tax on that while funds are in the JISA. If a Premium Bonds prize of £500 is won and held in the child's name, that £500 is tax-free.
Who legally controls Junior ISAs and Premium Bonds for children's savings
Junior ISA legal control
- Registered contact: The adult who opens the Junior ISA becomes the registered contact (usually a parent or guardian). This registered contact manages the account until the child reaches 16, when the child can take over management but cannot withdraw until 18.
- Beneficial ownership: The child is the beneficial owner from the date of account opening; at 18 the assets automatically transfer into an adult ISA.
- Transfers: A Junior ISA can be transferred between providers; the registered contact signs transfer instructions. The child cannot withdraw funds before 18 except in very limited circumstances (e.g. terminal illness).
Premium Bonds legal control
- Registered holder: Premium Bonds are registered in a named holder. If bonds are bought in the child's name, the child is the legal owner. If bought in a parent's name with the intent of later giving to the child, legal ownership remains with the parent until any legal transfer.
- Gift versus trust: Buying Premium Bonds in one adult's name and intending them as a gift to a child may create a trust or result in the bonds forming part of the purchaser's estate for inheritance tax (IHT) purposes unless formally transferred into the child’s name.
Useful primary sources: GOV.UK on ISAs, NS&I on Premium Bonds.
Contribution limits, gifting rules and tax implications for Junior ISAs and Premium Bonds
Junior ISA limits (current at time of writing)
- Annual subscription limit: The Junior ISA annual subscription limit for 2025/26 is £10,000 (indicative). This limit applies to combined subscriptions across cash and stocks & shares Junior ISAs.
- Who can subscribe: Parents, guardians and others can pay into a child's JISA, subject to the annual limit.
- Gifting: Payments into a JISA are treated as outright gifts to the child. There are no immediate tax charges on the giver, though the gift may be relevant for inheritance tax if the donor dies within seven years in relation to larger estate planning (seek specialist advice).
Premium Bonds limits and gifting
- Maximum holding: NS&I sets a maximum holding per person for Premium Bonds (for example, £50,000 as an indicative cap — confirm at NS&I). The purchaser can buy bonds in the child's name directly, or buy them in their own name.
- Gifting rules: If bonds are bought in the child's name, they are the child's asset. If bought in an adult’s name but intended as a gift, unless transferred legally they remain part of the adult's estate for IHT and may affect means-tested benefits.
Tax implications of gifting
- Potential IHT consequences: Large gifts may be chargeable to inheritance tax if the donor dies within seven years (taper relief and exemptions apply). Putting money into a Junior ISA is an immediate gift of capital to the child; legal advice is recommended for significant sums.
- Income from gifted assets: If a parent gives an asset to a child and continues to receive income from it, anti-avoidance rules can apply (not typical for JISAs or Premium Bonds bought outright for the child).
Inheritance tax risks for Premium Bonds versus ISAs
- Junior ISA holdings: Because a Junior ISA is held in the child's name from outset, it will typically fall outside the adult donor's estate for IHT (unless the donor retains control or income from the asset). The child's JISA belongs to the child, so it is part of the child's estate in the future, not the donor's.
- Premium Bonds held by an adult: If Premium Bonds intended for a child are held in the adult's name at death, they will form part of the adult's estate and may be subject to IHT if the estate exceeds nil-rate bands. To avoid this, bonds should be transferred into the child's name before the donor's death — transfers should be documented and may have tax implications.
- Practical note: Small gifts and normal expenditure out of income are generally outside IHT; but substantial lump sums should be considered within estate planning.
How to declare prizes or ISA income to HMRC
- Junior ISA income/gains: No need to declare growth or income while funds remain in the Junior ISA. When the child withdraws funds at 18 and invests or receives taxable income, normal rules and personal allowances apply.
- Premium Bonds prizes: Prizes are tax-free and not normally shown on a tax return. If a prize is paid to an adult and questions arise about wider self-employed or investment income, the individual should check HMRC guidance or seek professional advice.
- Reporting if unsure: If a parent believes HMRC requires disclosure (rare for children’s Premium Bonds or JISAs), use official guidance or contact HMRC. HMRC.
- Access: Junior ISA funds cannot be withdrawn before the child turns 18 (with specific exceptions). Premium Bonds can be cashed in at any time if held in the child's name, but if held in an adult's name the adult controls access.
- Ownership clarity: A JISA registers the child as beneficial owner. Premium Bonds require precise registration to avoid estate complications.
- Best practice: For clarity and to minimise inheritance risk, buy and register assets in the child's name where the child's ownership is intended.
| Feature |
Junior ISA |
Premium Bonds |
| Tax on returns |
Tax-free while within the JISA |
Prizes tax-free for the winner |
| Control |
Registered contact until 16; child owns at 18 |
Depends on registered holder; adult holding can create estate risk |
| Access |
Locked until 18 (with exceptions) |
Cashable anytime if in child's name |
| Contribution limits |
Annual JISA limit (e.g. £10,000 in 2025/26) |
NS&I maximum holding per person (check NS&I) |
| Inheritance tax (IHT) |
Belongs to child; usually not part of donor's estate |
If held by donor, may form part of estate |
Comparing Junior ISA and Premium Bonds for a child
Junior ISA
- ✓Tax-free growth
- ✓Child-owned at 18
- ⚠Locked until 18
Premium Bonds
- ✓Prizes are tax-free
- ⚠Returns are probabilistic
- ✗Estate risk if not in child's name
Advantages, risks and common mistakes when choosing between junior ISA and premium bonds
Benefits / when to choose each
- Choose a Junior ISA when the priority is tax-free growth, investing for long-term goals (university or adult life) and clear ownership that avoids donor estate complications.
- Choose Premium Bonds when the priority is capital security with potential tax-free prizes and easy access to funds provided the bonds are bought and registered in the child's name.
- Hybrid approach: Many families split contributions: some in a JISA for compound growth, some in Premium Bonds for accessible, secure prize-based savings.
Risks and errors to avoid
- Buying Premium Bonds in an adult's name 'for the child' without transfer: risk that bonds form part of the adult's estate for IHT.
- Exceeding JISA limits: ensure total contributions from all parties do not exceed the annual JISA limit.
- Assuming guaranteed returns on Premium Bonds: average prize rate is indicative and not a guaranteed yield; simulate scenarios before relying on prizes.
Practical checklist before deciding
- Is the money intended to be owned legally by the child from day one? If yes, prefer buying in the child's name.
- Is the aim long-term capital growth? Prefer Junior ISA.
- Is access flexibility or capital security essential? Premium Bonds may suit if registered to the child.
- Are there estate planning concerns? Use JISAs or transfer Premium Bonds to the child well before any unwanted IHT exposure.
Questions frequently asked
Can I put Premium Bonds in a child's name?
Yes. Premium Bonds can be bought and registered in a child's name; they then belong to the child and prizes are tax-free to the child.
Does a Junior ISA affect a child's benefits or tax credits?
A Junior ISA is the child's asset; it may affect means-tested benefits if the child’s assets are considered, though most benefits relate to the parents. For specifics, check HMRC guidance or benefits guidance.
What happens to a Junior ISA when the child turns 18?
At 18 the Junior ISA converts to an adult ISA in the child's name; the young adult can manage or withdraw funds then.
Do Premium Bonds need to be declared on a tax return?
No. Premium Bonds prizes are tax-free and normally do not need to be declared to HMRC.
Could gifts into a JISA be subject to inheritance tax?
Large gifts into a JISA may be considered for IHT if the donor dies within seven years, depending on amounts and overall estate; professional advice is advised for significant sums.
Who legally owns a Junior ISA?
The child is the beneficial owner; the registered contact manages the account until 16 but the child owns the assets.
Is splitting money between a JISA and Premium Bonds sensible?
Yes. Many parents combine both to balance growth potential and easy access / prize chance.
- Check where ownership will sit: register accounts in the child's name if the child should own the money outright.
- Confirm current limits and rates: visit GOV.UK and NS&I links to verify the latest JISA subscription limit and Premium Bonds limits.
- Document transfers: if transferring Premium Bonds or making large gifts, keep written records and seek professional estate or tax advice if sums are significant.
Written by Alan White, UK-based personal finance researcher specialising in tax-efficient savings and long-term wealth preservation. For more official detail consult GOV.UK and NS&I.