Savings 16 year old son

montana123

Hi

My son is 16 and I have a child's savings account in my name for him. I've just been notified by the bank that he will lose his gross interest on that account on 5th April as he's now 16. I need to change the account so that it's in his name and he will then need to claim the gross interest. However, I'm not sure if this is the best course of action or whether I should get him to open an ISA with the lump sum or do something else with it. Does anyone have any thoughts on this?

ses6jwg

Get in the ISA allowance early IMO.

Will be tax free forever.

cashbackproblems

If he doesnt have an income then he can fill out a form (R something) which doesnt take away tax from the interest, or you can just open him an ISA, but even post tax alot of isa's v normal accounts pay similar rates.

blueberrypie

He can get gross interest on any account by filling in a R85 form with the bank - this assumes that he does not have enough income to be liable for income tax (including the interest on the savings).

Even the best savings accounts are not paying very much interest at the minute, but ISAs are marginally better. With the info you've provided, I would certainly be looking at ISAs. Depending on what he plans to do with the savings, he could consider the A&L Flexible ISA, which pays 3.5%, or he could get a higher rate of interest on a fixed-term ISA. The advantage of these is that any interest paid within them is exempt from tax for as long as the funds stay within an ISA (not necessarily the same ISA - he can transfer).

The cash ISA limit for 2010/11 is £5,100 - if you/he decide to take this route and he has more than that saved, opening an ISA by the beginning of April will allow him to deposit £3,600 for the 2009/10 tax year, then deposit more in the new tax year.