Use your child - best child savings account

martinman3

gavinthegreat wrote: »

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?

The HMRC website http://www.hmrc.gov.uk/tdsi/children.htm#b is very vague about the £100 rule and you must really ask your local tax office as not declaring the interest if you need to could lead to fines and prosecution.:eek:

Please tell us what the official response is as the implementation of this rule is daft, even though I understand it's purpose, and always seems to me as it was drafted in a few minutes without any thought of the work involved for the parents.

gavinthegreat

martinman3 wrote: »

The HMRC website http://www.hmrc.gov.uk/tdsi/children.htm#b is very vague about the £100 rule and you must really ask your local tax office as not declaring the interest if you need to could lead to fines and prosecution.:eek:

Please tell us what the official response is as the implementation of this rule is daft, even though I understand it's purpose, and always seems to me as it was drafted in a few minutes without any thought of the work involved for the parents.

Have already drafted a letter which is being sent tomorrow. I am the child in this case , and the problem is that gift money was paid into a savings account which already had money in it, and had earlier had an R85 signed by myself. The gift money, (genuine gift by the way) will generate more than £100 by itself. We have just discovered this rule and so have written asking if it would be sufficient to simply de-register the R85, before the interest is actually paid (end of July)

The other question is due to the fact that I recently transferred the majority of the money (gift + original savings) to a fixed rate account which pays interest on maturity, which is after my 18th birthday. Have asked all this in the letter and am hoping I won't need to de-register the R85 on that account, as the interest is paid after I am 18.

Some money was also recently transferred into a current account, paying gross interest monthly, so we are very confused as to who decides which "bit" of the total amount is "gift money" and which is "original money". If the current account money came from the "gift balance" then it will be hit by the rule, if not and the money is deemed to have gone into the fixed rate account then I can hopefully avoid it for the reason above (I will be 18 when interest is paid).

No clue tbh, so shall just have to wait for the letter in return. As you say, I don't mind paying whatever extra tax they say is due, but would rather ask now than be accused of fraud later! Phew, I am sure none of that makes any sense to anyone else (having trouble explaining it myself)! :rotfl:

martinman3

Have already drafted a letter which is being sent tomorrow. I am the child in this case , and the problem is that gift money was paid into a savings account which already had money in it, and had earlier had an R85 signed by myself. The gift money, (genuine gift by the way) will generate more than £100 by itself. We have just discovered this rule and so have written asking if it would be sufficient to simply de-register the R85, before the interest is actually paid (end of July)

As you are the child/young person it is actually your parent(s) responsibility to declare the interest on their self-assessment form(s) if necessary.

The £100 limit is from each parent making a limit of £200 if the gift was from both your parents.

gavinthegreat

martinman3 wrote: »

As you are the child/young person it is actually your parent(s) responsibility to declare the interest on their self-assessment form(s) if necessary.

The £100 limit is from each parent making a limit of £200 if the gift was from both your parents.

Thanks for your reply

The thing is that on hmrc.gov.uk it says:
"Nor can interest be paid without tax taken off."
We assumed this meant that an R85 cannot be in place for the account in which the money was paid. I had thought the account should be net and then the excess tax (which would be applied to the original sum as well) could be claimed back, as in this example:
http://www.hmrc.gov.uk/tdsi/example5.htm

Also, I don't think they actually receive a self-assessment tax form on which to state it.

About the £200 limit if from both parents, the money was a direct transfer from a savings account held solely in my mum's name so I don't know if it could be claimed it came from both of them.


P.S. I get the impression that this entire rule is about accounts held in the child's name but operated by the parent. I should make it clear that the account the money was transferred into by bank transfer is entirely my own account (a Halifax Web Saver) and not in any way controlled or operated by my parents. No idea if this makes any difference or not

nsharples_2

Before he died last year, my father had invested £16,000 for my 7 year old son in two Nationwide Smart accounts and one Bradford and Bingley Kidzone account. I would now like to consolidate the three accounts into one and put his savings in the highest possible interest bearing account.

The three accounts pay full gross interest and I have now become the named account holder (on behalf of my son) following grant of probate.

What account would you recommend, given that I wish to retain the no tax status, am happy to commit the savings for the long term, and would ideally prefer to mange the account online? Many thanks.

jak

So to get this clear:
Each parent can gift to their child - but the interest per parent mustn't exceed £100- making £200 in total!?
This is for each year. So you can only save a maximum of £2000 @10% for example, as it'll generate £200 interest every year? Parents can't save any more than that? You would then have to remove the £200 interest every year and buy NS&I bond things because they're tax free?
Have I got that right?

Froggitt

jak wrote: »

So to get this clear:
Each parent can gift to their child - but the interest per parent mustn't exceed £100- making £200 in total!?

Yup

jak wrote: »

Parents can't save any more than that?

Not in kids name you cant. Each kid has the £100 interest per annum per parent "allowance".

jak wrote: »

You would then have to remove the £200 interest every year and buy NS&I bond things because they're tax free?
Have I got that right?

If the accumulated interest brings the interest earned over £100......dunno.....possibly then in breach of the £100 limit.

However, grandparents or any other person can give kids any amount. I dont know if I give a few grand to your kid, and you give a few grand to my kid, whether that is against the rules or would be picked up by the tax people. Maybe A to B, B to C, C to D, and D to A wouldnt be noticed if you have a few friends all wanting to save.

skoolmaster

Accounts for children
If you have decided to invest your Child Trust Fund voucher into a cash savings account, then the Hanley Economic Building Society currently offers an account paying 7.75% AER which allows you to make additions from £1.

Elsewhere, Britannia pays 7% AER on its CTF, but this rate includes a 1.25% bonus for 24 months. Again, the minimum addition is £1. Or Chorley & District pays 6.75% AER with no minimum addition.

If you have already invested your voucher but want to open up a savings account for your child, then Halifax's one-year Regular Saver account pays an impressive 10% AER on deposits from £10.

This rate really does outshine the rest of the children accounts on the high street, but another notable account is Nottingham Building Society's Regular Saver which pays 7.5% AER until 21 May 2009 on deposits from £10.

Or Yorkshire Building Society's Treasure Bond pays 6% AER until 31 May 2009 on deposits from £100.
[6.3% LATEST]
If you need instant access then you could consider the Save4it account from Halifax which pays 5.55% on deposits from £1.

skoolmaster

CHILDREN'S SAVINGS - JUNIOR CHOICE

HALIFAX
Childrens Regular Saver 10.00% £10

NOTTINGHAM BS
Childrens Regular Saver - Issue 6 7.50% £10

CHORLEY BS
Foxley Fund Account Bond or Term 6.75% £1

SCARBOROUGH BS
Childrens Savings Bond Bond or Term 6.00% £5

HARPENDEN BS
18 Club 5.68% £1

YORKSHIRE BS
Freedom Easy Access 5.65% £10

PRINCIPALITY BS
Childrens Account Easy Access 5.60% £1

HALIFAX
Save4it Easy Access 5.55% £1

BANK OF SCOTLAND
Halifax Save4it Easy Access 5.55% £1

WEST BROMWICH BS
Acorn Regular Savers (Branch) Easy Access 5.50% £10

WEST BROMWICH BS
Acorn Regular Savers (Direct) Easy Access 5.50% £10

CITY OF DERRY BS
Junior Saver Easy Access 5.50% £10

CHELSEA BS
Ready Steady Save Easy Access 5.45% £1

STAFFORD RAILWAY BS
First Track Easy Access 5.45% £1

YORKSHIRE BS
One Day Easy Access 5.40% £10

CHORLEY BS
Young Chorleian Easy Access 5.35% £5

HOLMESDALE BS
Young Saver Account Easy Access 5.35% £10

CAMBRIDGE BS
First Account Easy Access 5.30% £1

NORWICH & PETERBOROUGH BS
Family Young Saver 5.30% £1

NATIONWIDE BS
Smart Easy Access 5.27% £1

PROGRESSIVE BS (NI)
Start Up Easy Access 5.25% £1

BRADFORD & BINGLEY
Smart Save Easy Access 5.25% £10

SAFFRON BS
Ladybird Club Easy Access 5.25% £1

FURNESS BS
Young Savers Account Easy Access 5.22% £1

NORWICH & PETERBOROUGH BS
HeadStart II Easy Access 5.20% £1

LOUGHBOROUGH BS
Young Persons Easy Access 5.11% £10

MELTON MOWBRAY BS
0216 Savers Easy Access 5.10% £5

NEWBURY BS
Young Saver Easy Access 5.10% £1

MANSFIELD BS
Young Saver Bonus 5 Easy Access 5.06% £1

skoolmaster

CHILDREN'S SAVINGS - JUNIOR CHOICE
10% down to 5%

HALIFAX
Childrens Regular Saver 10.00% £10 :j

NOTTINGHAM BS
Childrens Regular Saver - Issue 6 7.50% £10:T

CHORLEY BS
Foxley Fund Account Bond or Term 6.75% £1

SCARBOROUGH BS
Childrens Savings Bond Bond or Term 6.00% £5

HARPENDEN BS
18 Club 5.68% £1

YORKSHIRE BS
Freedom Easy Access 5.65% £10

PRINCIPALITY BS
Childrens Account Easy Access 5.60% £1

HALIFAX
Save4it Easy Access 5.55% £1

BANK OF SCOTLAND
Halifax Save4it Easy Access 5.55% £1

WEST BROMWICH BS
Acorn Regular Savers (Branch) Easy Access 5.50% £10

WEST BROMWICH BS
Acorn Regular Savers (Direct) Easy Access 5.50% £10

CITY OF DERRY BS
Junior Saver Easy Access 5.50% £10

CHELSEA BS
Ready Steady Save Easy Access 5.45% £1

STAFFORD RAILWAY BS
First Track Easy Access 5.45% £1

YORKSHIRE BS
One Day Easy Access 5.40% £10

CHORLEY BS
Young Chorleian Easy Access 5.35% £5

HOLMESDALE BS
Young Saver Account Easy Access 5.35% £10

CAMBRIDGE BS
First Account Easy Access 5.30% £1

NORWICH & PETERBOROUGH BS
Family Young Saver 5.30% £1

NATIONWIDE BS
Smart Easy Access 5.27% £1

PROGRESSIVE BS (NI)
Start Up Easy Access 5.25% £1

BRADFORD & BINGLEY
Smart Save Easy Access 5.25% £10

SAFFRON BS
Ladybird Club Easy Access 5.25% £1

FURNESS BS
Young Savers Account Easy Access 5.22% £1

NORWICH & PETERBOROUGH BS
HeadStart II Easy Access 5.20% £1

LOUGHBOROUGH BS
Young Persons Easy Access 5.11% £10

MELTON MOWBRAY BS
0216 Savers Easy Access 5.10% £5

NEWBURY BS
Young Saver Easy Access 5.10% £1

MANSFIELD BS
Young Saver Bonus 5 Easy Access 5.06% £1