Use your child - best child savings account

khanom_2

The only other tax implications of making cash gifts is the possible spectre of inheritance tax if the donor dies within seven years of making it. And a quick warning, for those bright sparks thinking, “if I gave my brother’s kids £10,000 and he gave mine the same….”, well good thought, but no cigar. If the Inland Revenue spots you, you’re in trouble.

This is a paragraph from the 'child saving' page. I'm a bit lost here. Can anyone explain it to me pls? thanx

Jake'sGran

foxfield wrote:

What about the childdren's alowance. If this is not used except to be put into an account in the child's name is it seen as money from the parent and therefore subject to the £100 rule for interest

This is how I understand the rules when I had put small amount in accounts for my grandchildren but would you believe that I had forgotten this when gifting £3000 to them in joint accounts for the last two years, i.e. the maximum that is allowed to be given away. Both lots are in accounts paying good rates so I will have to alert their parents to the fact that the interest over £100 in each of the last two years counts as income for them to pay tax on. At least the eldest one can have an ISA after next March.

isasmurf

Any money 'gifted' by a parent that earns over £100 interest will be taxed at the parents tax rate. This rule does not apply for money 'gifted' by another relative, and the interest earned will count under the Child's normal tax allowance. Children have the same tax allowance as any other person under 65 - £5,035 for 2006/07.

Jake'sGran

isasmurf wrote:

Any money 'gifted' by a parent that earns over £100 interest will be taxed at the parents tax rate. This rule does not apply for money 'gifted' by another relative, and the interest earned will count under the Child's normal tax allowance. Children have the same tax allowance as any other person under 65 - £5,035 for 2006/07.

Perhaps I am losing it after all or just having a lot of senior moments because I did know that too. So I can relax again now.

khanom_2

Hi people
Just looking for some clarification here. I went to open a Halifax Childrens Regular Savers account today. They said only one parent and one grandparent is allowed to open an account for a given child. Have the rules changed since the write up of the site? Where it said loads of people can open an account for a given child. Have I understood this wrong, or have I been given the wrong information by the Halifax staff?

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1089574348,16470,

deefadog

Time does fly I have only 3 more payment into the Halifax 10%, what's the next best option?

laykieloo

I am very new to this site,

I have read the article about childrens money savings and all the last comments but I really don't understand.

Each child has a tax limit of £5,035 per year, which they are allowed to earn before they are subject to tax.

However if a child earned £100 or more in intrest payments on savings this is subject to tax.

So if my child had £2000 in a savings account earning intrest at 5.35% he/she would have to pay tax on the intrest? Even though this is within the annual allowance?????

And could someone please clarify, If it took me 3 years to save £2000 for each of my children, at which point they would be earning over the £100 yr in intrest, is this taxable every year until the intrest becomes lower than £100?

If so, would it be acceptable to then open a second account? or is it calculated on how much intrest the child earns on each and ever account they have?

So, for example if they have one account with £1850 at 5.35% which would be £99, then another account with £50 at 5.35% which would be £2.67, giving a total intrest of £101.67, would they take both savings into account, or would you avoid having to pay the tax?

If the annual tax allowance is £5,035 per child, why can you not save up to this ammount per child per year tax free??

Thank you

ReportInvestor

laykieloo wrote:

So if my child had £2000 in a savings account earning intrest at 5.35% he/she would have to pay tax on the intrest? Even though this is within the annual allowance?????

And could someone please clarify, If it took me 3 years to save £2000 for each of my children, at which point they would be earning over the £100 yr in intrest, is this taxable every year until the intrest becomes lower than £100?

If so, would it be acceptable to then open a second account? or is it calculated on how much intrest the child earns on each and ever account they have?

Bad news on all these questions.

£2,000 from a parent @ 5.35% - taxable.
More than £100 gross interest from savings given by one parent - taxable
This is calculated on the total savings / interest in all accounts.

Single mother works her fingers to the bone to give her child £2K to use towards uni fees - taxable.

Rich child's grandparents, aunts, uncles give a child £95K to as a deposit towards a Chelsea pad after uni - not taxable.

laykieloo

Thank you for your reply to my questions.

It seems really unfair that my hard earned money that I save for my children is subject to tax even though the total amount saved for each child does not exceed their tax allowance.

So can a grandparent have a standing order into a childs account to save, say £25 per month per child and this money would not be subject to tax at all?

Would I get into trouble if I payed my Mum £25 per month into her account and then she paid £25 per month into my son's account??

ReportInvestor

laykieloo wrote:

It seems really unfair that my hard earned money that I save for my children is subject to tax even though the total amount saved for each child does not exceed their tax allowance

I tend to share you views, as you probably guessed .

laykieloo wrote:

So can a grandparent have a standing order into a childs account to save, say £25 per month per child and this money would not be subject to tax at all?

Correct. There would be no income tax due and the £300 pa gift is well within the £3K annual gift allowance so that it wouldn't affect inheritance tax on the grandparent's estate under any circumstances.

laykieloo wrote:

Would I get into trouble if I payed my Mum £25 per month into her account and then she paid £25 per month into my son's account??

It would unwise to leave such a paper trail for the Revenue to find. Is there no way your mum could afford an outright gift?