The simple answer: JISAs aren’t taxed! And that’s what makes them so great. As usual, the truth is a bit more complicated. JISA investment gains are not taxed, however the money deposited into a JISA, like its big sister, the ISA, will not help reduce your current year tax bill the way a deposit into a pension would.
For instance, a person who earns £50,000 in a year and contributes £4,000 to her child’s JISA is still taxed on £50,000 by HMRC, but if she deposited that same £4,000 to her pension, she’d only be taxed on £46,000 of income. So owing to those immediate tax breaks, the pension would be the clear winner, no? Not necessarily. Because unlike a pension, which is taxed upon withdrawal, the money within the JISA will never again be subject to income tax, so any and all JISA gains are tax-free. We’re pro not paying taxes whenever possible and legal, however the pension versus ISA question is a complicated topic, and best debated elsewhere.