For many UK parents and carers, the dream is to build a financial cushion that helps their child enter adulthood with more freedom and less debt. But with so many different savings accounts, tax wrappers, and ever-changing rules, it’s not always easy to know where to start.
The good news is that the UK tax system provides a number of smart, tax-efficient ways to save for children. By starting early, you can make the most of annual allowances, benefit from the power of compounding, and take advantage of options that grow tax-free. Whether you’re saving for university, a first car, a house deposit, or even planting the seeds of a pension, saving for your child in the UK in 2025/26 is both achievable and rewarding.
Why Early Saving Matters
Saving for your child isn’t just about handing them a lump sum when they turn 18. It’s about giving them more opportunities and less financial stress as they step into adulthood.
For example, even a modest savings pot could reduce the amount they borrow for university, make it easier to purchase their first car, or put them ahead of the game when it comes to getting on the housing ladder. With inflation still at 3.5% in April 2025 and housing costs continuing to rise, the need for early saving has never been clearer.
The earlier you begin, the more benefits you unlock. Compound growth means that interest and investment returns accumulate on top of themselves, snowballing over time. Annual allowances, many of which reset every April and can’t be carried forward, also become more valuable when you start using them sooner. Ultimately, starting early means reducing your child’s reliance on high-interest borrowing later in life.
Junior ISAs: The Tax-Free Favourite
For most families, the Junior ISA (JISA) is the most tax-efficient way to save for a child.
From April 2025, the subscription limit remains at £9,000 per child, per tax year. This can be split between a cash JISA and a stocks & shares JISA, depending on your goals. Funds are locked until the child turns 18, at which point the account becomes an adult ISA and they gain full control.
The real advantage of a JISA is that all interest, dividends, and capital gains are completely tax-free — and they don’t affect your own allowances. With cash JISAs currently paying around 4% AER (June 2025) and low-cost investment platforms available, this is often the first place parents should look when saving for their child in the UK.
Child Trust Funds: Don’t Forget to Review
Children born between September 2002 and January 2011 may still have a Child Trust Fund (CTF) instead of a JISA. While these accounts can’t run alongside a JISA, they can be transferred into one.
This is worth reviewing, because JISAs often offer better rates and lower fees. Crucially, transferring doesn’t use up the annual £9,000 JISA allowance, which means you could transfer an old CTF and still contribute fresh funds in the same tax year.
Surprisingly, HMRC estimates show that more than 670,000 young adults haven’t claimed their matured CTFs, with average balances of around £2,000. Checking whether your child has one could make a real difference.
Children’s Savings Accounts: Simple but Taxable
Children’s savings accounts are easy to open and a good way to teach money basics, but they sit outside the ISA framework. That means tax rules apply.
Children are entitled to their own personal allowance (£12,570 in 2025/26) and, in some cases, a starting rate for savings of up to £5,000. However, the parental settlement rule complicates things: if a parent’s gift generates more than £100 in interest in a tax year, that interest is taxed as the parent’s income.
With easy-access savings rates of 4–5% AER, this threshold can be reached quickly — often once savings hit £2,000 to £2,500. For larger balances, a JISA or Premium Bonds is usually a better option.
Premium Bonds: Fun but Unpredictable
Premium Bonds remain a popular choice for children’s savings. They offer the chance to win tax-free prizes instead of paying traditional interest, with a prize fund rate of 3.8% (April 2025).
While there’s no guaranteed return, the excitement of possible wins makes them appealing. You can hold up to £50,000 per child, and money can be withdrawn before the child turns 16 if needed.
Junior SIPPs: The Long Game
If you’re thinking decades ahead, a Junior Self-Invested Personal Pension (SIPP) might be the answer. Parents and grandparents can contribute up to £2,880 a year, which is topped up by 20% tax relief to reach £3,600.
Although the funds are locked until the child reaches at least age 57, starting a pension this early gives compounding an extraordinary runway. Many families also use Junior SIPPs as part of inheritance tax planning.
Practical Steps to Get Started in 2025
When it comes to saving for your child in the UK, the key is to be intentional and consistent. Start by checking whether your child already has a CTF or JISA. Next, define your saving goal — whether that’s a university fund, a car, or a deposit for their first flat.
Use annual allowances strategically, beginning with a JISA, then considering Premium Bonds or other accounts. Automating contributions, even as little as £25 per month, makes saving simple and effective over the years. Finally, involve your child in the process. Teaching them about money early on helps build confidence and good habits.
Final Word
Saving for your child in the UK isn’t just about building a pot of money. It’s about creating freedom, reducing stress, and giving them the best possible start in life. By making use of allowances and starting early, you can turn small contributions into significant opportunities.
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