Use your child - best child savings account

pucbaldwin

Hi

Would be really grateful for a clarification on the tax question for children's savings.

I have a nephew in Sweden who is 1. I would like to make regular savings for him, but am a 40% taxpayer and want to avoid paying tax on his savings if possible.

Am I correct in thinking that I could open up one of the best buy accounts for him (e.g. the BoS 6% saver) and avoid paying any tax. Having a quick glance at the BoS application it said it would take off basic rate tax. Can someone confirm whether I have misunderstood this or how I would go about ensuring the tax free status for this account? Does it make any difference that my nephew is not in the UK?

Thanks very much in advance.

Pete

Reaper

pucbaldwin wrote: »

I have a nephew in Sweden who is 1. I would like to make regular savings for him, but am a 40% taxpayer and want to avoid paying tax on his savings if possible.

Am I correct in thinking that I could open up one of the best buy accounts for him (e.g. the BoS 6% saver) and avoid paying any tax. Having a quick glance at the BoS application it said it would take off basic rate tax. Can someone confirm whether I have misunderstood this or how I would go about ensuring the tax free status for this account? Does it make any difference that my nephew is not in the UK?

Your first problem is whether you can open an account for him in the UK in his name, I suspect not as it is a common problem on these boards that people living abroad discover banks are put off by the potential complications.

If they do let you then in theory as you are not a parent you can have the interest considered his and therefore ask for it to be paid without any tax deducted (ask for form R85) assuming he has not used up his personal tax allowance.

Some countries may want to tax him for money earned outside the country even if he does not bring it in. However I have no idea of the tax rules in Sweden.

carbonmonoxide

Hi - we've been paying into a child trust fund basic savings for 2 years and the bonus rate has now finsihed and interest has dropped to around 1% I can't find many other good in branch child trust funds and don't really want the hassle of opening a postal account.

My partner hasn't used her ISA allowance this year so I am thinking it might be an idea to start paying into that instead, unless anyone knows of any other good accounts?

jimjames

carbonmonoxide wrote: »

Hi - we've been paying into a child trust fund basic savings for 2 years and the bonus rate has now finsihed and interest has dropped to around 1% I can't find many other good in branch child trust funds and don't really want the hassle of opening a postal account.

My partner hasn't used her ISA allowance this year so I am thinking it might be an idea to start paying into that instead, unless anyone knows of any other good accounts?

An ISA is normally the best way to save without paying tax so it would certainly be worth using that allowance first.

jimjames

sootyvrs wrote: »

Please can someone help.

We have been putting £40 a month savings for our son for the last 10 years into a saving plan (Worth £5200) so I calculate it has only earned around £400 interest in 10 years which I assume is not that great.

We want to now invest this and keep paying £40 per month for another 10 years so there is no need to withdraw any cash.

Can someone please advise the best thing to do as I believe it's taxable on interest over £100 per year?

Is this savings plan based on shares on just a building society deposit? If shares then there are much more flexible options around that should give better returns than the quite expensive friendly society products.

Ones I use are Aberdeen and F&C who both run childrens savings plans that are very low cost.

In terms of tax you only pay tax on the income over £100 if you are a higher rate taxpayer as basic rate tax is already paid. So if one of you is higher rate and one isn't then having the account in the name of the lower taxpayer would reduce the liability for tax.

jimjames

pucbaldwin wrote: »

Hi

I have a nephew in Sweden who is 1. I would like to make regular savings for him, but am a 40% taxpayer and want to avoid paying tax on his savings if possible.

You have already paid tax on your income so you won't be liable for further income tax on his savings if they are in his name. In the UK he would have the full personal allowance to offset interest against and to earn interest of £5000 at the moment would mean a very big balance in his account!

brightonqueen

My 2 year old son inherited £7000 from his Grandfather which i put into a Nationwide Smart Account for him. He also has a Child Trust Fund which currently has the maximum £1200 allowed per year.

I tried to apply for Housing Benefit as my own saving are below the £16,000 limit. However, they refused me application, as they are counting my son's savings in his Smart Account as my own savings, as the account is technically in my name & therefore they say i could potentially withdraw the £7,000 for myself.

I wondered if anyone knew of any account that i could transfer my son's £7,000 to in one go, that would be solely in his name & unaccessable to him untill he is 18, as is the Child Trust Fund??

CHlHlRO

Could someone advise me what do do with the £1,100 my son has inherited? It's currently in my old building society account, which pays 1.75% gross AER (it's actually my old children's savings account, but a new one could be opened in his name). It was just somewhere to put it while I find a suitable account for him.

It's likely that we would be able to make regular payments on top of this, although probably only a tenner per month. I don't want to lock the money away until he's 18 but I don't mind a shorter lock-in for a good interest rate, especially as he's still only a newborn he won't need to access the cash for a good while yet!

It would be ideal if the account could be accessed online for making deposits etc, although we could get to a Derby or Nottingham branch of somewhere to open the account if need be.

I've looked at the Halifax/BOS regular savers but think I may have misunderstood - it seems we couldn't deposit the £1,100 initially, only in instalments. I'd rather get the whole amount somewhere earning a decent amount of interest and then add to that if it makes sense to do so.

Thanks for any helpx

rb10

I would put the £1100 into a normal fixed rate account (although bear in mind that not all accounts can be held for children - the Halifax Guaranteed Reserve is one the can).

Then pay £10/month into a Halifax Childrens' Regular Saver. You won't get higher than 6% anywhere else!

(Alternatively, you could drip-feed the money into the Childrens' Regular Saver at £100/month, but this gets messy as you don't have anywhere to keep it until then.)

scottie49

My wife and I have been saving for my daughter over the years and she now has £5000 which I wanted to put into a Halifax Fixed Rate Web Saver account in her name, at 3.8% for 3 years. However, using the saving calculator it would appear that for year three the interest accrued would be £204.69, taking it over the £200 limit for two parents, and therefore the whole amount eligible for tax.

Is my interpretation correct, and does anyone have any others ideas?