Use your child - best child savings account

sharp-spark

sharp-spark wrote: »

So for a couple, any interest above £200 is taxed at the parent's rate.
Hypothetically, if I were to open a Nationwide Smart Limited Access account and put in 50k and earn the 2.25%, I would get £1130 before tax.
£930 after the £200 allowance.
Is that then £465 against each parent's PSA?

xylophone wrote: »

£100 per parent per child.

[EDIT: newbie - can't post links]

post 3

I understand that. I want to know how does the remainder affect each parents PSA?

Is the example in my original post (quoted) correct?
Also would I have to declare the remainder to HMRC, or is all this calculated automatically?

Thanks.

Froggitt

sharp-spark wrote: »

I am just referring to the "Use your child's tax-free allowance" section on the website.

What do you find dodgy about it?

Also, I am already aware of the £200 threshold (I mentioned it in my original post). The question is which parent's interest is the rest calculated from? Is it split evenly by both parents?

Thanks.

It's dodgy because you are referring to it as your money, yet investing it in your childs name, and appearing to want to use their tax allowance to reduce your tax.

Why not give HMRC a ring and tell them of your tax evasion plans and let them comment on their legality?

It's the parent that gave the child the money (although stretching the use of the word gave in your case).

sharp-spark

Froggitt wrote: »

It's dodgy because you are referring to it as your money, yet investing it in your childs name, and appearing to want to use their tax allowance to reduce your tax.

Why not give HMRC a ring and tell them of your tax evasion plans and let them comment on their legality?

It's the parent that gave the child the money (although stretching the use of the word gave in your case).

Fair point. But I got the impression that was the point of the threshold anyway and if it isn't legal, why is it even being suggested on the website?

xylophone

The Nationwide Smart Limited access is opened in the child's name and the money in it is beneficially owned by the child, as the parent is bare trustee. The interest arising is also beneficially owned by the child.

If each parent had contributed half the capital, half of the whole of the interest is taxable on each parent because each half exceeds £100.

https://www.bsa.org.uk/BSA/files/80/802c440c-e934-4abd-b913-9e35ec29e102.pdf

Froggitt

sharp-spark wrote: »

Fair point. But I got the impression that was the point of the threshold anyway and if it isn't legal, why is it even being suggested on the website?

Is this what you are referring to? http://www.moneysavingexpert.com/savings/child-savings-tax-free

I don't think MSE is suggesting the same as what you are planning to do.....it refers to the child's money and money given to the child from the parent.....not your money in the name of the child, which would always be taxable as your money.

Also did you note this wrinkle

Once the child earns more than this, the whole lot is taxed at the parent's tax rate.

sharp-spark

Yes, that is what I was referring to. This thread links from that page.

I guess I misinterpreted it. Although I just reread another article on thisismoney (still can't post links) discussing exactly this (and the same account I mentioned in my example) and they say the practice isn't illegal.

Yes I noticed that 'wrinkle', which is why I was asking how it would affect the parent's PSA.

eskbanker

Froggitt wrote: »

I don't think MSE is suggesting the same as what you are planning to do.....it refers to the child's money and money given to the child from the parent.....not your money in the name of the child, which would always be taxable as your money.

I think MSE were originally suggesting pretty much exactly what sharp-spark suggests and hence the reference to 'use your child' (as opposed to, say, 'help your child') in the title of this thread when it was started by the man himself 13 years ago. Seems to me they've toned down their stance since then, perhaps at the 'request' of HMRC!

Emilybutt12

Hi all,

I'm new to the forum so please forgive me if I do something wrong.

Using Sharp-spark's hypothetical example above, if my husband and I were to put £50k into the Nationwide account for our son and it earnt the £1130 interest that would count towards our own PSA. So depending upon how much interest we earn from other savings we would either need to pay tax if above the PSA or not if below. My main question would be how is the interest split? Is it always 50/50 regardless of which parent put in.? For example say I magically won the lottery and put in £50k, would the £1130 interest be against my PSA or would it be split evenly? I'm only asking as I'm a basic tax payer and my husband is higher so I want to make sure that we either don't go above our individual PSA by investing/ saving our money in a different way, but if we do (with such amazing interest rates at the moment) I put into our self-assessments the right figures and pay the correct amount of tax.

Many thanks

sharp-spark

I might be wrong, but I believe it depends on who put the money in.

If you put 100% in then £1130-£100=£1030 would eat up your PSA alone. So £30 would be charged tax. The £100 deduction is the per parent threshold.
If you both put in 50% then you would each 'earn' (as noted above it is technically the child's money) £565 and have £565-£100=£465 against each of your PSAs.

xylophone

(as noted above it is technically the child's money)

It is actually the child's money....