Use your child - best child savings account

xylophone

http://www.candidmoney.com/questions/question226.aspx
http://www.northernrock.co.uk/savings/learn/childrens-accounts/

ejv

Thanx for that.Got a bit.....but still feeling thick:o
They only say about a couple with one child. Could you please tell the figures for a couple with 3 children?
How about using the capital+interest for holidays at the anniversary of deposit and start afresh to avail another £100 tax free next year?:D

mbailey

ejv wrote: »

Thanx for that.Got a bit.....but still feeling thick:o
They only say about a couple with one child. Could you please tell the figures for a couple with 3 children?
How about using the capital+interest for holidays at the anniversary of deposit and start afresh to avail another £100 tax free next year?:D

Also I assume it per child and not per account per child?

My working assumption is that it is per child, so £200 for child1, £200 for child2, etc

To be honest the whole thing is really tricky. I have an account which has money from parents, grandparents and other friends. It goes back over 10 years now.

Trying to work out and prove which part of the interest is from parents contributions is near impossible now, especially if you have to take into account compound interest rates as well.

The whole things seems to get very little coverage so I wonder if most people just ignore this rule.

A lot of people have suggest now to have 2 savings account for the child, one for parents contributions only and a second for all other contributions. That way it is clear when calculating the interest. How ever I have seen no advice from banks or anyone else with regards to doing this, so I wonder if it does just get ignored.

Obviously if a parent is giving £1000's each year to a child, then the interest will be significant and should be looked at more carefully. I am guessing/assuming not many parents are in this position though.

xylophone

See first link in post 582

"However, the £100 limit is per child per parent, so it’s possible for a couple to give away a total of about £13,200 at 3% interest before they’d both be liable to tax rather than the children."

How ever I have seen no advice from banks or anyone else with regards to doing this, so I wonder if it does just get ignored.

See link 2 in post 582 above. (Northern Rock):

"There are special rules in place with HMRC if the savings have been given by a parent. If gifts from a parent produce more than £100 gross income a year, the whole of the income from the gift is normally taxed as the parent’s income and a child cannot get back any tax on that income. Nor can interest paying accounts be registered to have interest paid without tax taken off. The £100 rule applies separately to each parent. The £100 rule applies to income arising each year and it does not matter whether the fund is comprised of part capital and part added interest. The £100 rule applies as long as income is over £100 in any one year for any one child from one parent."

mbailey

xylophone wrote: »

See first link in post 582

"However, the £100 limit is per child per parent, so it’s possible for a couple to give away a total of about £13,200 at 3% interest before they’d both be liable to tax rather than the children."

How ever I have seen no advice from banks or anyone else with regards to doing this, so I wonder if it does just get ignored.

See link 2 in post 582 above. (Northern Rock):

"There are special rules in place with HMRC if the savings have been given by a parent. If gifts from a parent produce more than £100 gross income a year, the whole of the income from the gift is normally taxed as the parent’s income and a child cannot get back any tax on that income. Nor can interest paying accounts be registered to have interest paid without tax taken off. The £100 rule applies separately to each parent. The £100 rule applies to income arising each year and it does not matter whether the fund is comprised of part capital and part added interest. The £100 rule applies as long as income is over £100 in any one year for any one child from one parent."

Thank you.

That all works great and is easy to understand and calculate if you have a childs account with funds from just a parent only.

The point I was trying to make is that the banks don't offer any advice about having a childs accounts for gifts from parents and a second account for all other gifts.

xylophone

The point I was trying to make is that the banks don't offer any advice about having a childs accounts for gifts from parents and a second account for all other gifts.

Presumably having given the above information, they expect the parent to work it out for himself?

Froggitt

mbailey wrote: »

The whole things seems to get very little coverage so I wonder if most people just ignore this rule.

Whether they do or not, HMRC dont.

Froggitt

xylophone wrote: »

"However, the £100 limit is per child per parent, so it’s possible for a couple to give away a total of about £13,200 at 3% interest before they’d both be liable to tax rather than the children."

Errrrrr - no.

After year one, the capital would be about £200 higher per child, producing interest of £106 p.a. per child per parent, thus falling foul of the £100 rule.

Subtract the amount of compounded interest you expect to generate over your timescale, and only invest upto that amount.

ejv

xylophone wrote: »

"However, the £100 limit is per child per parent, so it’s possible for a couple to give away a total of about £13,200 at 3% interest before they’d both be liable to tax rather than the children[/B]

So is it £26,400 for a couple with 2 children?

xylophone

Errrrrr - no.

The example given relates to money given by two parents to two children for the first year on interest of 3% see full link.
http://www.candidmoney.com/questions/question226.aspx

The second link http://www.northernrock.co.uk/savings/learn/childrens-accounts/ (see bold in post 562 above) covers what happens when interest is compounded.