The 19-year-old Barnes has scored five goals since his loan switch to the League One side in January, including the second in a 2-0 win against Charlton on Tuesday night.
"He's a special talent and we're very lucky to have him here," Neilson told the MK Citizen.
"He could play at the top level, but I don't think he's ready for that yet. He still has a lot of development left in him, but you can see he's something special. He's got ability that others don't have. And the way he has taken to the dressing room, and the players have taken to him is a credit to him.
"I think he could do with it, another year before going into the Premier League. It's something we're trying to do, we'd like to have him here for another year but the ball is in Leicester's court, they own him.
"Hopefully he has enjoyed himself, he's learning and we'll see what we can do."