COMMERCIAL FEATURE

Every parent wants to give their children the best possible start in life, and there are many ways to make provisions for their future, including making financial savings, whether it's a savings account, a government savings product like the new Junior ISA or another type of investment.

Saving for children is not always simple. There are tax considerations, and it can become confusing to compare the different saving options available. Like adults, children have a tax limit. In 2011-2012 children in the UK had a tax limit of nearly seven and a half thousand pounds.

When saving for a child, it's important to ensure that the payments are tax-free, by completing the HMRC Form R85, which can be obtained from the Inland Revenue website. This form should be completed and submitted to the bank or building society where the child savings account is held. As long as the child does not receive more than their tax limit in a tax year then these savings are free of taxation. If a parent or step parent deposits money into a child's account, the child can earn up to one hundred pounds per year on that money before they get taxed on it.

The difference with Government child saving initiatives such as the Junior ISA is that annual limits are set and accounts are tax efficient. This means that it is not necessary to complete and submit the HMRC Form R85 in order to prevent the savings from being taxed. Junior ISAs have been designed in order for adults to save on behalf of their children, and had a limit of three thousand and six hundred pounds in the 2011-2012 tax year. The tax year runs between 6 April and 5 April the following year.

Junior ISAs, like Child Trust Funds before them, are a way of parents investing in a child's future. The account is held in the name of the child, so only they can access the money when they become an adult. Parents, family and friends can contribute to the account, and it will remain tax efficient as long as the total amount invested in a tax year doesn't exceed the limit, which is likely to increase each year with inflation. Adults cannot touch the money; it provides a lump sum for children when they become adults.

There are many different providers of Junior ISAs, and some of them allow the accounts to be started with low monthly premiums of just ten pounds.