Halifax Childrens Regular Saver

Bisoy

Hi to all MSErs,

My wife and I are joint account holders on our HFX childrens regular saver.
We have 2 children we put away £100 SO monthly and this is our second year.

I don't know if it's possible if we could have opened it on separate account instead of joint trustees so that we could contribute £200 monthly to each of them. And if it's possible would we be hit by the maximum £100 tax free interest allowance?

Sorry if I'm asking a daft question but unsure if it's possible and if we could benefit by doing it.

I would appreciate any replies.thanks.

Cypher

I know each parent can open a seperate account for each child.

from http://www.halifax.co.uk/savings/childregularsaver.shtml

Having one account per adult, per child (under 16), so for example, each parent, grandparent, friend etc can hold an account for the same child.

Bisoy

Thanks Cypher. It was laziness i could have found it myself. So technically it's possible.

Now this is my plan: My 2 children have now accumulated savings of more than £2000 each which is earning decent interest with YBS one day account. Am I right in saying and will it reap better benefits if we will move it on our HFX websaver account then my wife and I hold each child regular saver separately (that means 2 each) then drip feed £100 monthly from my HFX websaver.

So if its possble I am back with my second question on my OP, will we be over the the £100 tax free allowance for each child?

Math is not my strongest subject so would appreciate any help. Or it's better to leave it with YBS then just operate an adult regular saver account?

Once again would appreciate any replies.thanks.

Cypher

The Websaver pays 5.00% AER if you don't have a cash card.

A save4It account pays 5.30% AER.
BTW your OneDay account shows 5.45% AER

On the tax issue,

Saving £100 per month this would give the child £1200 per annum at 10% regular saver, thats approx £600 @ 10% (£600 is the average account balance over the year) = £60 interest.

The child can recieve £100 interest, tax free off each parent in any year. So if you did do them two accounts in each of your names they can earn £200 before tax.

from the YBS One Day account notes

It should also be noted that interest on money given by a parent of the child is only tax-free up to £100 a year, applied separately to each parent.

I'm not sure how this all works, is it money gifted in any year that earns more than £100 in interest, or is it an acummulative thing. So you gave them £1200 this year = £60 interest, next year another £1200 another £60 interest, but now that makes £120 in interest. Do they then pay tax on the £20 additional.
{edit} from the info in the next post it looks like you as the parent have to pay tax on the WHOLE amount of interest.

BTW If a grandparent or someone else were to pay in the £100 / £200 per month then the tax wouldn't be an issue until the child earned more than their tax entitlement, £5000+ income in any year.
(Its a crazy rule not allowing parents to save for their children)

Cypher

from the BBC website

Where parents save on behalf of a child, the tax rules are different. Only £100 of interest (per parent) can use up the child's personal income tax allowance.

Where interest exceeds this level, the whole of the interest will be taxed on the parent.

This is really a mechanism to prevent parents from holding their own cash savings in their children's names and taking advantage of the tax allowances.

So that looks like its you as the parent who has to declare it and pay tax on it.


From Whatprice.co.uk

Tax and Childrens Savings

Children are subject to income tax on bank accounts just like adults.

They receive a tax allowance and as long as their total income including interest doesn’t exceed this allowance in the financial year, they will not be taxed on their interest. (The allowance for 2006-2007 is £5,035.) However, this only applies when the savings are gifted by a relative or friend. Interest on money gifted by parents will be subject to tax if the amount of interest earned in a year exceeds £100 per parent. (This prevents parents from taking advantage of children’s accounts for their own savings.) If your child’s annual income will be less than their tax allowance and the money you give them in a year will amount to less than £100 in interest, you can fill out an R85 form from the Inland Revenue to apply to have the interest paid without tax being deducted. It may be worth opening separate bank accounts if your child will be receiving money from yourself as well as relatives or friends, to save any confusion.

May interpretation on this is that your doing is fine. You will each be gifting £1200 to each child, which will earn the child £60 per annum in interest. So I read that as it being ok its under the £100 allowed.

The interest from previous years gifts is the only point that I think needs clarification

Bisoy

Thanks a lot for such very useful information.

So I hope my understanding is right, that if I contribute £100 each for my son and daughter monthly and same as my wife doing same £100 each of them then we will pass the allowable £100 tax free interest for each parent, right? Since that will give me roughly £60 for my son and £60 for my daughter and would be same for my wife. Have I got it right? then....

I guess we will look for other options instead.

Cypher

My interpretation was you could gift money to a child each year and only when the gift would cause the child to earn £100 in interest do you have to pay tax on it. I also thing this is per child. So by you and your wife both paying £100 per month to each child, I don't think tax would be an issue. As each child off each parent would only earn around £60 per year in tax.

1jim

It seems to me that if you withdraw £100 a month in cash to "spend" on "household items" and your childrens grandparents withdrew the same amount and put this into the childrens accounts you could earn each child up to their personal tax allowance as they will have gifted the child money and thus avoiding any tax bill.........


also does anyone know what happens to the regular saver after the 12mths.. I know that the saved money gets moved into the save4it account but does the regular saver start again or does it close down and we have to open another account

thanks
jim

System

1jim wrote:

also does anyone know what happens to the regular saver after the 12mths.. I know that the saved money gets moved into the save4it account but does the regular saver start again or does it close down and we have to open another account

It carries on.

1jim

does any one know what the interest rate is in year 2? the website just says this..... "

[FONT=Arial, Helvetica]How long is the 10% interest rate payable?
The 10% rate is fixed for one year from when the opening credit is received. If you continue to fund in subsequent years, we will communicate the new fixed rate to you.[/FONT]

"

Thanks
Jim

Cypher

I'm in my second year now (well my son is) and its stayed at 10% so far