ISAs: ‘Loophole’ allows two ISAs if you are between 16 and 18


HMRC have confirmed a ‘loophole’ which allows savers between the ages of 16 and 18 to invest in both Cash ISAs and Junior ISAs at the same time.

Junior ISAs are available for savers up to the age of 18, whilst a Cash ISA can be opened by anyone over the age of 16; HMRC have confirmed that both can be opened in the same tax year, significantly increasing the amount of money which can be saved tax efficiently.

Higher ISA contributions

Savers between the ages of 16 and 18 can therefore make significantly larger contributions to tax free savings than adults.

The maximum contribution allowable into a Junior ISA is £3,600 per year with the ceiling on ‘adult’ Cash ISAs being £5,640 in the current tax year.

The maximum that can be contributed to ISAs between the ages of 16 and 18 is therefore £9,240, in the 2011/12 tax year.

An investor has to be 18 before they can open the Stocks and Shares component of an ISA.

HMRC ISA guidance

In a statement HMRC said: “When a child becomes 16 they can apply for an adult Cash ISA which they can subscribe to, in addition to any subscriptions made to their Jisa (Junior ISA). Holding both a Jisa and an ‘adult’ Cash ISA does not breach the Jisa rule that the child can only have one Jisa account of each type. The subscription limits for all adult Isa products apply independently of whether or not a child holds or has held a Jisa in the relevant year.”

Financial experts say that although children are often non tax payers if the savings are left in place for years to come, when they are more likely to pay tax, the benefit of tax free interest could be significant.

Experts also warn that with interest rates so low savers should shop around for Cash ISA best rates and not simply accept the first rate they are see.