UK Saving for Children (2026/27): Bare Trust vs JISA vs Junior SIPP vs Designated
UK saving for children 2026/27: bare trust (common-law, CGT under Section 60 TCGA 1992) for flexible larger sums with child-attribution tax, JISA £9k/yr tax-free + child controls at 18, designated account legal grey zone, Junior SIPP £3.6k locked till 55, parent vs grandparent attribution rules, IHT planning + £100 rule (parent gifts only).
Options compared
| Option | Tax status | Flexibility | Complexity |
|---|---|---|---|
| JISA (£9,000/yr) | Tax-free growth + tax-free at 18 | Locked until 18; child takes full control then | Low - regulated standard product |
| Junior Self-Invested Personal Pension (SIPP) (£2,880 net) | Tax-free + 20% relief on contributions | Locked until 55 (57 from 2028) | Low - regulated product |
| Bare Trust (Section 60 TCGA 1992 for Capital Gains Tax (CGT) treatment) | Income + gains TAXED ON CHILD (using their PA / PSA / Dividend Allowance / AEA) | Trustee controls until 18; child can compel transfer at 18 | Medium - written trust deed; trustee duties; HMRC Trust Registration Service registration required for nearly all express trusts since Sept 2022 (limited exclusions, not income-driven) |
| Designated Account | Legal status unclear - HMRC sometimes treats as parent's | Parent retains control + access | Low - just label the account, but legal uncertainty |
| NS&I Premium Bonds (under 16) | Tax-free wins | 1-3 days access; parents manage until 16 | Very low |
Recommended priority order
- Junior ISA (£9k/year) - tax-free, simple, child controls at 18. The default first option for any family saving for a child.
- Junior SIPP (£3,600 gross, £2,880 net) - if you want pension-locked saving + the 20% tax relief. Best funded by grandparents.
- Premium Bonds (under 16) - for occasional gifts + fun prize wins; engaging for older children.
- Bare Trust (for excess above JISA + JSIPP) - flexibility + child-attribution tax. Best for grandparents giving above JISA limit due to parent £100 rule.
- NS&I Children\'s Bonus Bonds (when available) - tax-free fixed-rate saving. NS&I periodically launches these; check current availability.
- Avoid: designated accounts - legal uncertainty + likely better to use bare trust or JISA instead.
Related guides
- UK JISA vs Junior SIPP 2026/27 - direct comparison.
- UK Premium Bonds 2026/27 - children under 16.
- UK IHT 7-Year Gift Taper 2026/27 - IHT context.
- UK Trust Taxation 2026/27 - bare + other trusts.
Frequently asked questions
What is a bare trust?
A simple trust where the child is the BENEFICIAL OWNER of the assets from day one, but a trustee (typically parent / grandparent) administers + invests the assets until child reaches 18 (or another agreed age). Bare trusts derive from common-law trust principles; for CGT purposes the bare trustee + beneficiary are treated as one person under Section 60 TCGA 1992. Major feature: income + gains are taxed on the CHILD, not the contributor (with parent gift exception). For modest income amounts, this means using the child's Personal Allowance £12,570 + Personal Savings Allowance £1,000 + Dividend Allowance £500 + CGT Annual Exempt Amount £3,000. Bare trusts are most flexible for larger sums above JISA limits.
What's the "£100 rule" for parent gifts?
Anti-avoidance rule (Section 629 ITTOIA 2005): if a PARENT (not grandparent or other relative) makes a gift to a child + that gift produces MORE THAN £100/year of income, the income is taxed on the parent (not the child). Designed to prevent parents shifting income to children to use the child's allowances. So a parent putting £40k into a bare trust generating £2k interest = the £2k is taxed on the parent at their marginal rate. Grandparents are NOT subject to this rule - they can gift to children + the income is taxed on the child. Major reason to encourage grandparent contributions to children's savings.
What's a "designated account"?
A standard adult account labeled "for [child's name]" or "Designated Account". Legal status ambiguous: HMRC sometimes treats as the parent's assets (so income taxed on parent + remains in parent's estate for IHT). Banks + building societies offer these but they're NOT a formal trust. Risks: (a) parent maintains legal ownership + control - this is often actually desirable, (b) on parent's death, the account passes per will or intestacy + can be claimed by other heirs, (c) HMRC tax treatment uncertain. Recommendation: prefer bare trust or JISA over designated account. Designated accounts are a legacy informal arrangement that's being phased out by clearer alternatives.
Bare trust vs JISA - when does which win?
JISA wins for: regular family contributions up to £9k/year, simplicity, tax-free at 18, no trustee paperwork. Bare trust wins for: larger sums (above £9k JISA limit + £3.6k JSIPP limit annually), flexibility on access age, ability for the child to claim assets at 18 (or later if structured cleverly), grandparent gifting where parent's £100 rule applies. Common high-net-worth strategy: max out JISA + JSIPP first, then bare trust for excess. The bare trust may also be used for specific assets (a house, a portfolio) rather than just savings.
How does Inheritance Tax (IHT) work for child savings?
Contributions are LIFETIME GIFTS to the child. Use: (a) £3,000 annual exemption per donor per year - covers normal JISA / JSIPP contributions, (b) £250 small gifts exemption per recipient per year, (c) gifts from surplus income (Section 21 IHTA 1984) - unlimited if structured properly, (d) wedding gifts £5k (parent), £2.5k (grandparent), £1k (other). Beyond exemptions: Potentially Exempt Transfer (PET) 7-year rule with taper. Grandparents funding children's savings typically benefit from the surplus income exemption + the £3k annual allowance combined. Parents face the £100 rule on income but no other IHT issue.
What about Premium Bonds for children?
Excellent simple option for grandparents. NS&I Premium Bonds available for children under 16 (managed by parent). Tax-free wins. £25 minimum, £50k maximum per child. Wins can be reinvested into more Premium Bonds or moved to JISA at age 16+. Particularly suitable for occasional gifts (birthdays, Christmas) - £25 here, £50 there over the years can build up. At 16, the bonds transfer to the child's control. Lower expected return than equity-based JISA over long terms but more "fun" with prize wins + suitable for younger children to engage with.
What about a property purchased in trust for a child?
Complex. Buy-to-let property held in bare trust for child: rental income taxed on the child (using their PA + property allowance £1k), with the £100 rule applying to parent gifts. Capital gains on sale taxed on the child (uses their CGT AEA £3,000). Stamp Duty Land Tax (SDLT) applies on purchase. The trust deed must be properly documented + the trust registered with HMRC's Trust Registration Service - most express bare trusts now require registration regardless of income, subject to limited exclusions (5MLD rules since Sept 2022). Major advantage: leveraged property growth in child's name for tax efficiency. Major disadvantage: complexity, professional advice needed (legal + tax + accounting fees £2k-£5k), child gains full control of property at 18. Generally only suitable for substantial assets + sophisticated families.
How do I open + manage these?
JISA: open via providers - Vanguard, HL, AJ Bell, Moneybox, Beanstalk + many others. Need child's NI number (after 16). Bare trust: open via bank / investment platform that offers bare trust accounts - HL + AJ Bell both do. Trust deed often a simple template provided by platform; for complex arrangements, use a solicitor (~£500-£1,500). Register with HMRC's Trust Registration Service - most express bare trusts must register regardless of income (since Sept 2022 5MLD rules), with limited exclusions. Junior SIPP: HL + AJ Bell + others offer. NS&I Premium Bonds: directly via nsandi.com. Setting up children's savings is generally simple via mainstream providers; the complexity arises with larger sums or specific tax planning.