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Child Savings Tax Question
flakeyflakey
Posts: 6 Forumite
Hi
I understand that a child can earn up to £100 interest from money from parents without any tax been applied, and that it's £100 per parent. How does this work in effect though from the banks point of view do they automatically tax if it's £100 or £200 ie do they assume a child has 2 parents, if not what do you have to do to 'prove' the money is from 2 parents?
Also what's the position if the money is from grandparents - how do you prove the money has come from them?
...or is it the case that the banks pay the interest tax free beyond those sums and the tax is collected/ applied by HMRC when declared in tax returns?
any help appreciated
I understand that a child can earn up to £100 interest from money from parents without any tax been applied, and that it's £100 per parent. How does this work in effect though from the banks point of view do they automatically tax if it's £100 or £200 ie do they assume a child has 2 parents, if not what do you have to do to 'prove' the money is from 2 parents?
Also what's the position if the money is from grandparents - how do you prove the money has come from them?
...or is it the case that the banks pay the interest tax free beyond those sums and the tax is collected/ applied by HMRC when declared in tax returns?
any help appreciated
0
Comments
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The bank will simply follow your instructions. If you do nothing, they will deduct basic rate tax. If you register a child's account for gross interest, the will deduct no tax.
If tax is due, it's up to you to declare it.
If funds have come from a non-parent I'd suggest keeping a signed declaration from the donor to prove this. It will almost certainly never be asked for!0 -
Also, if the parent giving the money is a non taxpayer (earning less than £10,000) you are allowed keep the R85 on the childrens account even if the child is earning over £100 in interest!
I spoke to HMRC and they confirm that this is correct.0 -
PeacefulWaters wrote: »The bank will simply follow your instructions. If you do nothing, they will deduct basic rate tax. If you register a child's account for gross interest, the will deduct no tax.
Ok, I've registered via R85 for it to be paid gross, so irrespective of how much interest is earnt it won't be deducted via the bank?0 -
Unless the interest earned in the child's name is over £10,000...but that's quite a lot when interest rates are around the 1% mark.flakeyflakey wrote: »Ok, I've registered via R85 for it to be paid gross, so irrespective of how much interest is earnt it won't be deducted via the bank?:footie:
Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money. 0 -
interest rates are around the 1% mark.
Children can do better.......http://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-childrens-accounts.html0 -
Thanks for the help guys. btw for saving rate Lloyds was good, got 4% and instant access for my child's account0
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