Background Anxiety and depression co-occur in children and adolescents with anxiety commonly preceding depression. Although there is some evidence to suggest that the association between early anxiety and later depression is explained by a shared genetic aetiology, the contribution of environmental factors is less well examined and it is unknown whether anxiety itself is a phenotypic risk factor for later depression. These explanations of the association between early anxiety and later depression were evaluated. Methods Anxiety and depressive symptoms were assessed longitudinally in a U.K. population-based sample of 676 twins aged 5–17 at baseline. At baseline, anxiety and depression were assessed by parental questionnaire. Depression was assessed three years later by parental and adolescent questionnaire. Results Shared genetic effects between early anxiety and later depression were found. A model of a phenotypic risk effect from early anxiety on later depression provided a poor fit to the data. However, there were significant genetic effects specific to later depression, showing that early anxiety and later depression do not index entirely the same genetic risk. Conclusions Anxiety and depression are associated over time because they share a partly common genetic aetiology rather than because the anxiety phenotype leads to later depression.