£100 tax free interest limit on Child Savings

sjw7_2

Hi All

I have been lurking for a while but thought it was about time to post.

We have some savings for my 20month old son. My wife and i are adding £25 a month for him as is my step father so he is building up quite a nice little nest egg. My concern is that in a couple of years time he will have enough that he is earning more than £100 interest per year on the money that my wife and i have paid into the account and he is liable for tax at the rate we pay on anything over the first £100. I think this is a disgracefull way for the government to tax a child i know it stops people getting a free tax break by using their children to save money but when it is actualy the childs money and not the parents then i think its very unfair.

Am i right in thinking that the money given my my step father is not touched by this tax law?

Cheers

Simon

someone

i think it is £100 intrest for money you have given kids THAT YEAR

grumbler

sjw7 wrote:

...I think this is a disgracefull way for the government to tax a child i know it stops people getting a free tax break by using their children to save money but when it is actualy the childs money and not the parents then i think its very unfair.

What about CTF? See link in the blue box above.

Am i right in thinking that the money given my my step father is not touched by this tax law?

Yes, but I think it is worth have some documents prooving source of money.

someone wrote:

i think it is £100 intrest for money you have given kids THAT YEAR

You are wrong. See my post #5 in Interest on childrens savings thread.

sjw7_2

Hi thanks for the replies.

We already have a CTF for him that we are contributing to separately. This account is one that he isnt going to know about and we intend to give him the money from it when he is much older. I often wondered what it would have been like to be given a large cheque by my parents on the day i got married so its the kind of thing we would like to be able to do for him.

How does the taxman enforce this law at present? does he rely on honesty or can he track where money came from? My Stepfather contributes by standing order to his account as we do so there is a paper trail there to prove where the money comes from.

I dont like this law as i think it penalises people saving honestly for their children. Im trying to find a way of maximising the money he has and making sure the taxman keeps his grubby mits off it.

Cheers

Simon

Cook_County

There are plenty of ways of doing this legitimately. If the income exceeds £100 per parent then ALL of the income is taxable.

Various methods include:
1. tax-free National Savings
2. offshore approved roll-up funds
3. onshore unit/investment trusts that pay a low rate of income but aim to build up capital gains

I am sure there are others...