Parents turn to Junior ISAs pre-Budget – how JISAs could reduce inheritance tax bills

More parents are putting money in Junior ISAs (JISA) as they rush to shield their earnings from potential tax threats in the Budget, new data suggests.

October 2025 was the biggest ever month for people opening JISAs with investment platform Hargreaves Lansdown – on average, £870 was paid into these newly opened accounts.

Junior ISAs have been growing in popularity this year, Hargreaves Lansdown data suggests, with four out of the top five months for new Hargreaves Lansdown JISA openings falling in 2025.

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It has come amid mounting speculation that the wealthy will be targeted with higher taxes in the upcoming Autumn Budget on 26 November, amid rumours the cash ISA allowance could be cut too.

Parents appear to be alive to these concerns and are considering the most tax-efficient way to shield and transfer their wealth to their families.

With a Junior ISA, parents and grandparents can give money to children while keeping it in a tax-free wrapper.

You are able to contribute up to £9,000 to a Junior ISA every tax year. You can open a cash junior ISA or a stocks and shares junior ISA, or both. You don’t need to pay capital gains tax or income tax on returns or savings interest accrued in an ISA.

The child is the legal owner of the JISA but is not able to withdraw any money from the account until they are 18.

A JISA is a great way for parents and grandparents to build up a nest egg for their children tax-free, and they can also reduce inheritance tax liabilities. We look at how this works.

How can JISAs help shield you from inheritance tax?

A JISA can be appealing for grandparents who want to reduce inheritance tax liabilities by giving gifts during their lifetime.

Contributions into Junior ISAs are considered gifts for inheritance tax purposes. Via the annual exemption, you can give up to £3,000 every year without needing to worry about the money being subject to inheritance tax after they die. This can be given to one person or split between different people. You can also carry any unused annual exemption forward to the next tax year, but only for one tax year. There is also a small gifts exemption – read more in our piece on how to avoid inheritance tax.

You can put more in a junior ISA, but the contributions would become subject to inheritance tax if you die within seven years of the gift being given. Find out more about the seven year rule on gifts and the taper rate in our guide.

Transferring wealth by contributing to a JISA can also be better than giving it as a cash gift, as money held in a JISA is protected from extra taxes on interest or capital gains.

The question you will have to ask yourself is whether the recipient will be mature enough at age 18 to make smart decisions with the cash instead of splurging it.

JISA alternatives

Another tax-efficient way of transferring your wealth is contributing to your child or grandchild’s pension.

Junior self-invested personal pensions (SIPPs) have become more popular in recent years as some parents and grandparents have used them as a way to both support their children far into the future, and shield them from paying inheritance tax.

The downside is that the recipient won’t be able to access the money until they reach the Normal Minimum Pension Age, which is currently 55 but rising to 57.

However, investing for their retirement early means your cash could have several decades to grow and compound, so it could constitute a significant boost to their pension pot.

Any adult can contribute £2,880 annually to the Junior SIPP, which, once 20% tax relief is factored in, brings the total yearly contribution to £3,600. The Junior SIPP reverts to the recipient’s control when they turn 18.

Similar to JISA contributions, Junior SIPP payments count as gifts for inheritance tax purposes, so unless they are within inheritance tax gifting allowances, they could be subject to the levy if you die within seven years.