Use your child - best child savings account

deefadog

I had all the same questions, but missed this thread and started my own, but in the end here is my conclusion/plan! (credits to cloud_dog)

It is only *your / your partners* money that counts toward the £100 tax limit on interest earned. So, if for example savings deposits (cash, SO, etc) came from the grandparents account(s) then there is no tax liability - worth thinking about ;-) although do *not* try and beat the taxman (cover my ar*e). So.........


CTF (tax free) £1200 limit per year (where you don't have control over the money)
This will be our daughters fun money, So will be saving around £30 per month into this account, then she can use it on what ever she wants.

Options:
a) deposit your/your partners money into your Child's CTF.

b) alternatively you could put the money into yours/wife's ISA (if unused by yourselves)


Savings account (where you have control over the money)
This is the money we want to save for our daughter, where we decide what it is spent on, i.e wedding, car etc. around £100 per month.

Options:
a) up to the £100 interest limit (first year) put your/your partners money into it.
b) Second year and onward let a family member or grandparent deposit the money


Things to look out for:

The CTF can be transferred, so you can always get the best deal, but watch out for charges.


This is how i see this at the moment, please feel free to pick any holes in it as i am new to this and am learning the MSE ways

Question

If you get tax above the £100 interest earned, then what is the point of the child's saving accounts? They are only good for one year (if you max it out)


Hope that helps

Deef

MikeS_5

The Stroud & Swindon offers 5.5% 'Branch Premier Account'. Whilst this seems aimed at 'adults', there appears to be no hindrance to children opening an account - and being free of tax by completeing the usual form.

mary

I looked at this account but note the 5.5% is only guaranteed until 30 September (i.e. 4 months)

> Variable rate, including a guaranteed bonus of 0.75% gross above Bank of England
base rate until 30/09/06
> From 01/10/06, rate will equal Bank of England base rate until 30/09/08

LJacks

Need some help. Anyone any idea of a good current account for my son who's just turning 16 to have his weekly wages (full time job) paid into? He's currently with LTSB who will give him an under 19's account but don't know if there is something with better interest rates / freebies / services. Can anyone help?

He's also looking for a regular savings account too. Are there any that have added benefits for young workers?

System

Excuse me folks i am a bit lost as to this '£100 tax free limit' regarding childrens accounts. I have read this thread and am no wiser. If I, a non tax payer wanted to plough in a few thousand into my 9 year old sons savings account are you telling me that he is only able to earn £100 in interest before its taxed?

So, i couldnt plough all my savings into this new Halifax childrens 10% savings account, i would have to make sure he earns less than £100 interest? Have i got that right?

mary

Yes, that's what I understand.

In any case, the maximum you can put in the 10% account during a 12 month is £1,200, so you won't reach the £100 limit in interest on that alone anyway.

ReportInvestor

IMHO parents with money to invest on behalf of their under 3s for university should open a cash child trust fund.

This is first and foremost a fund the parent can add cash to without worrying about the 100 quid annual income limit for money given to the child by one parent.

Then you should invest some other money in the best value / performance stock market fund you can find - keeping an annual check that your child's combined cash/shares "portfolio" matches the risk/reward ratio you personally are comfortable with.

And closer to university you can gradually withdraw some of that equities fund, using the 1,200 parental contribution limit on the cash child trust fund to provide your own "stakeholder style lifestyling".

isasmurf

Judi wrote:

Excuse me folks i am a bit lost as to this '£100 tax free limit' regarding childrens accounts. I have read this thread and am no wiser. If I, a non tax payer wanted to plough in a few thousand into my 9 year old sons savings account are you telling me that he is only able to earn £100 in interest before its taxed?

A child has the same personal allowance as adults have. To stop parents dumping in their savings and getting the interest tax-free, HMRC say that money gifted from parents can only earn £100 in interest at the child's tax rate. Anything more than £100 per parent is then taxed at the parent's tax rate. As you are a non-taxpayer it makes no difference, as if interest from money gifted by you goes over the £100 mark it will be taxed at your tax rate (i.e. non-taxpayer). However, I would also think it will be counted as your income so it could take you over your personal allowance and into the tax bracket.

wilmaT_2

MY CHILD IS 14 AND HAS INHERITTED £20,000 i DONT KNOW WHAT TO DO WITH IT. ANY ADVICE?

nkitson

Wilma,

The amount of money concerned suggests that you should probably be taking professional advice. You might also like to have a look at the Motley Fool's discussion board on investing for children http://boards.fool.co.uk/Messages.asp?bid=50077

Some questions and considerations that will come up

Has the money been left directly or in some form of trust? If the former then he/she will have the right to all the money at age 18. If the latter, and depending on the words in the will, the money does not have to be distributed until age 25. If it is the former, and you think 18 is too early for your child to have all the money, it may be possible to get a Deed of Variation which changes the will up to 2 years from the death of settler. (I say 'may' as a Deed of Variation needs permission from anybody affected by the variation - ie your child - and they may not be allowed to give permission at 14. In any case, this certainly needs a solicitor to advise)

If the child is able and likely to want to access all the money at 18 then any investment should probably be considered short to medium term - say in a 2 year or more fixed interest account. Incidentally, you don't have to use an account designated as 'Child'; most accounts will allow you to apply on your child's behalf if you explain the situation. You will be able to get the interest paid without any tax deducted if you complete a R85 form.

If your child can't access the money until 25 then you could consider it a long term investment and place the money in, for example, an index tracker fund, remembering the 'shares can go down in value as well as up' proviso.

Please note that I am not a professional advisor - I offer the above as food for thought only! I've also just noticed the date you posted this so you've probably made your plans by now - never mind, hopefully useful to someone else!

Nick