Use your child - best child savings account

michaels

Quick Q - is the 100 interest limit per child per parent - ie could both wife and I give each of our two children 1800 quid so each child earns 200 in interest? (4 x x180 altogether)

Mikeyorks

michaels wrote: »

Quick Q - is the 100 interest limit per child per parent - ie could both wife and I give each of our two children 1800 quid so each child earns 200 in interest? (4 x x180 altogether)

Yes, that's right. From the original article this thread is discussing :-

Children can earn £100 interest per year before you're taxed on it

However, don't assume you can dunk fortunes in your kid's name. If a child generates more than £100 interest in the course of the year from money specifically given by each parent, this income is taxed at that parents' tax rate.

minsie

Hi my daughter has just turned 16, since she was born i have always saved for her. i now want to make sure this money is earning her the best rate of interest. i have tried to get her an ISA with ICESAVE recommeneded by Martin, the problem is you have to be 18 to open one with them. anyone know who else is offering good rates and will accept 16 year olds for ISA? i would alos like to know the best saving account for her she is staying on at scholl so wont be paying tax.

many thanks for any help given

Midnight_Tboy

hi there,

I'm looking into setting up a child savings account for my newborn and 3yr old, however I'm concerned about it possibly causing complications. I would be paying money into it myself, but also their grandparents would be paying money into it too so over time this may build up substantially which is the idea for doing it of course towards their wedding etc.

Reason I am concerned is, I believe that if the child is under a certain age, then it has to be signed in the name of the parent/guardian (understandable as obv a child cant sign it). But does this mean that if I am to be means tested then this falls under "my savings"? As I do contract work so my job is never secure, I may have short periods of time where I need to claim benefits while waiting on the next contract. In order to receive JSA etc I have to submit how much in savings I have. Would that mean that my childs moneys would need to be declared? As that would then mean that even if I had say for example 1k in emergency savings, but if my children had combined a cpl of grand in total after some time, then it would mean I would be refused benefit and expect to live off the money that I had set aside for our children? I seriously hope not and am worried I may get stung if go to set this account up....especially as some of the money would have been from grandparents etc too.

Hope you guys can help,

thanks,
Tuck

martinman3

Midnight_Tboy wrote: »

hi there,

I'm looking into setting up a child savings account for my newborn and 3yr old, however I'm concerned about it possibly causing complications. I would be paying money into it myself, but also their grandparents would be paying money into it too so over time this may build up substantially which is the idea for doing it of course towards their wedding etc.

Reason I am concerned is, I believe that if the child is under a certain age, then it has to be signed in the name of the parent/guardian (understandable as obv a child cant sign it). But does this mean that if I am to be means tested then this falls under "my savings"? As I do contract work so my job is never secure, I may have short periods of time where I need to claim benefits while waiting on the next contract. In order to receive JSA etc I have to submit how much in savings I have. Would that mean that my childs moneys would need to be declared? As that would then mean that even if I had say for example 1k in emergency savings, but if my children had combined a cpl of grand in total after some time, then it would mean I would be refused benefit and expect to live off the money that I had set aside for our children? I seriously hope not and am worried I may get stung if go to set this account up....especially as some of the money would have been from grandparents etc too.

Hope you guys can help,

thanks,
Tuck

There are two separate issues here.

Firstly, most child accounts can be opened in the child's name if old enough or as trustee accounts in which case the money invested is the property of the child. You as parent may be the first name on the account but you only the trustee (or signatory), the terms and conditions and/or application form will mention this somewhere so check this, and as a result you would not need to declare it.

Secondly, HMRC has the £100 rule for interest on savings given by a parent, mentioned in previous posts. I would strongly advise the child's grandparents to open another account (which would probably need to be opened with a different organisation as normally one account per child per organisation) for each child and to use this for any savings that they (or anyone else apart from parents) may make on behalf of them. As you are expected to calculate the annual interest generated by gifts from both parents alone this is tricky if the gifts from others are placed in the same account. Note that the £100 rule would not apply to the accounts opened by the child's grandparents.

gavinthegreat

If a child is 17 years old and a parent gifts them money, the interest to be received to be over £100, is it still taxable if the interest is not actually paid until after their 18th birthday?

Example, child born 1st August and has opened an account after their 17th birthday, say last September, with interest payable this September, after their 18th birthday. Account opened with £2500 at 5% interest, generating income of £125. However, as this is not paid until they are 18 is it not taxable, even though it was given to them when they were under 18?

Midnight_Tboy

martinman3 wrote: »

There are two separate issues here.

Firstly, most child accounts can be opened in the child's name if old enough or as trustee accounts in which case the money invested is the property of the child. You as parent may be the first name on the account but you only the trustee (or signatory), the terms and conditions and/or application form will mention this somewhere so check this, and as a result you would not need to declare it.

Secondly, HMRC has the £100 rule for interest on savings given by a parent, mentioned in previous posts. I would strongly advise the child's grandparents to open another account (which would probably need to be opened with a different organisation as normally one account per child per organisation) for each child and to use this for any savings that they (or anyone else apart from parents) may make on behalf of them. As you are expected to calculate the annual interest generated by gifts from both parents alone this is tricky if the gifts from others are placed in the same account. Note that the £100 rule would not apply to the accounts opened by the child's grandparents.

thank you for that detailed reply, much appreciated. So presuming I'm correct in my reading of it then I AM ok should anything happen regarding work as wouldnt need to declare as only acting as a 'trustee (aka signatory)' and not actually held under my name. And that if I put too much in and it does earn interest over £100 in the year then it gets complicated as then have to seperate the grandparents contributions to my own, so it would be easier to have 2 seperate accounts, 1 for me and 1 for my grandparents to make it easier for future. I expect it'll take a while before start earning that sort of interest but it's good to know as mainly just want it saving for them instead of risking leaving it in a jar at home (so to speak) so any interest on it is a bonus but not essential to work between best deals etc.

many thanks again.

Midnight_Tboy

also - could I ask - regarding the grandparents having an account for my son/daughter just to double check.

So they can put on as much money as they want into that, no matter how much not counting limits on per month paying in as set by the bank. So whether it was £20 or £20000, all given over a long period of time by the grandparents as gifts then no tax would be payable at all on it, UNLESS (god forbid) that the grandparents die within a 7yr period of that final payment (of which presumably they would calculate tax to pay based on the 7yrs worth of interest from statements? Or would they actually take 40% of the actual physical money from that 7yr period. ie if they had paid over the 7yrs 10,000 then the government would steal 4,000 thereabouts back?? )

martinman3

A child has a personal allowance, currently £5225, so provided the annual interest from all their accounts plus any other income is less than that there would be no income tax to pay. At current interest rates a child would need to have about £92500 in an account to generate taxable interest, assuming no other income.

For an inheritance tax question you should really ask on the tax forum, but as far as I know each one off gift would be treated separately and would start a seven year timer and if the nil-rate band was used up IHT would be payable according to this taper relief table. IHT is payable on the gift not the interest it generates.

years before %age of full 40% rate
death
0-3 years 100%
3-4 years 80%
4-5 years 60%
5-6 years 40%
6-7 years 20%
> 7 years 0%

Anyone can make one IHT exempt gift of up to £3000 every year so probably better to do that if money is to be spread over many years. Also grandparents can make an exempt wedding gift of up to £2500 to each grandchild too.

gavinthegreat

gavinthegreat wrote: »

If a child is 17 years old and a parent gifts them money, with the interest to be received to be over £100, is it still taxable if the interest is not actually paid until after their 18th birthday?

Example, child born 1st August and has opened an account after their 17th birthday, say last September, with interest payable this September, after their 18th birthday. Account opened with £2500 at 5% interest, generating income of £125. However, as this is not paid until they are 18 is it not taxable, even though it was given to them when they were under 18?

Bump, still keen to know this