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Interest on childrens savings
sc123_2
Posts: 40 Forumite
It is correct that only the first £100 of interest on a childrens savings account is tax free. I was told by a B.S. today that they have a childrens account that you can put a maximum of £20K into at 4.5% gross and the interest is tax free. I was then told by their financial advisor that only the first £100 (ish) is tax free. Anyone know who is right, I just assumed that all savings in childrens accounts was tax free.
thanks
thanks
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Comments
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No but there are limits on how much can be held for them0
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The BS financial adviser has conveyed the wrong message. The important thing is the source of the money.
If it is from parents and the interest earned by the child in a tax year is more than £100 then ALL the interest is taxable at the parents' top rate, not just the interest over £100.
If the money comes from a grandparent or other source then none of it will be taxable until the child's total annual income exceeds their personal individual tax allowance of nearly £5K.0 -
My understanding is their tax status is the same as ours. Ie can earn up to approx £4500 before paying tax.£2.00 Savers Club = £34.00 So Far
+ however may £2 coins I have saved in my Terramundi since 2000.
Terramundi weighs 8lb 5oz0 -
Your understanding is wrong. http://www.hmrc.gov.uk/taxback/childsavings.htm :kazd wrote:My understanding is their tax status is the same as ours.
Children, like adults, can have a certain amount of income before they start paying tax. They are entitled to the same personal allowance as other people... There are special rules if the savings have been given by a parent - see more information:£100 rule
There are special rules if a parent has given the savings to their child. If gifts from a parent produce more than £100 gross income a year, the whole of the income from the gifts is normally taxed as that parent’s income. A child cannot get back any tax on that income. Nor can interest paying accounts have interest paid without tax taken off.
The £100 rule continues to apply to young people until they reach 18 or marry. They cannot normally complete form R85 to get interest without tax taken off if it includes gifts from a parent which, alone or when added to other gifts from the same parent, will produce more than £100 gross income a year.
The £100 rule applies separately to each parent.
See an example.0 -
Can someone please clarify for me, that each individual child can earn up to £4,500 in interest (on savings) before being liable for tax? This doesn't mean that they cannot hold in excess of £4,500 in savings, before they become liable to pay tax on the savings?
Sorry to be such a thicko, but I've not been in a position to put large sums into savings up until now, and am trying to work out the best way to have some money invested. My sons' godmother may be interested in using accounts in their names, thereby avoiding personal tax. I was also looking at making investments, but paying anything into accounts in their names would be pointless with the £100 ruling.One day the clocks will stop, and time won't mean a thing
Be nice to your children, they'll choose your care home0 -
You did mean, I hope, that the money will be your son's? Otherwise it would be defrauding the Revenue.sarymclary wrote:My sons' godmother may be interested in using accounts in their names, thereby avoiding personal tax.
You are right. It doesn't.sarymclary wrote:This doesn't mean that they cannot hold in excess of £4,500 in savings, before they become liable to pay tax on the savings?
Your son is allowed £4,895 income before tax in the 2005/6 tax year if the money is given to him by his godmother.
So that means at 5% gross he could be given nearly £100K before he had any tax to pay, and even then it would only be 10% on that portion of income above £4,895.
Ordinary savings tax @ 20% would kick in on total income over £7,855 in the 2005/6 tax year.0 -
Does the £100 interest limit before the parent pays tax apply to each child? e.g. I have 2 children - does this mean that as long as EACH of them earns less than £100 p.a. interest from money I give them there is no Tax to pay?
And presumeably my wife could do the same thing?0 -
That's my understanding, yes, though I'm not qualified to comment.Debbie0
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