childrens savings- few questions from a confused parent!

lilylaren

Hope someone can help with the below.
we have two children 3 and 5.
both have trust funds- 5 year old has one set up by goverment with the £250 voucher and 3 year old has a ISA (cant touch till 18) one as they had stopped the scheme.
both have approx £3000 each in their trust funds- most given by relatives (christening/birthday chrismas) and a small amount from myself and my husband (at one point i had a standing order for £5 per week each) so prob about £250 each of that is from us.

additionally i have also just set them each up a childrens savings account for barclays and was going to put £5000 each from inheritence for them. (the rate pays 1.5%)

I have now read about the £100 interst per child per parent rule and have the following questions

1. does this include income from the trust fund?
2. how do we prove money has come from relatives and not us- is the fact its recieved by cheque enough? (not always but 90% of time)
3. If i had our child benefit sent direct to them as a way of saving regularly is that still counted as being a gift from us?
4. would i be expected to go back and prove who gave what for previous years?
5. Is there any change to the rule if a parent (my husband) does not pay tax as he earns under the tax free allowance?

I dont want to do anything wrong!

Thank you!!

Reaper

lilylaren wrote: »

I have now read about the £100 interst per child per parent rule and have the following questions

1. does this include income from the trust fund?

No. CTFs and JISA are exempt.

2. how do we prove money has come from relatives and not us- is the fact its recieved by cheque enough? (not always but 90% of time)

I keep a record of cheque numbers and amounts from relatives in case they ever ask.

3. If i had our child benefit sent direct to them as a way of saving regularly is that still counted as being a gift from us?

Yes. It's your money.

4. would i be expected to go back and prove who gave what for previous years?

It's very unlikely the tax man would ask you to unless he was investigating all your affairs due to fraud elsewhere, millions in your childs names or similar. In theory he could ask which is why I keep records but I don't expect ever to have to produce them.

5. Is there any change to the rule if a parent (my husband) does not pay tax as he earns under the tax free allowance?

If the £100 rule is exceeded then it is taxed as if it is the parents money. So yes if he was not paying tax he would not have to pay tax on his share as long as the extra income does not push him into a tax bracket.

xylophone

It is expected to be possible to transfer the CTF to JISA from April 2015.

https://www.gov.uk/government/news/government-to-allow-child-trust-funds-to-transfer-to-junior-isas

This could give greater flexibility.

https://www.gov.uk/child-trust-funds/overview

The income arising in CTF/JISA is tax free, no matter who has given it.

You mention inheritance - do you mean that the children have received legacies or that you/your husband have received an inheritance and gifts from the inheritance are being made to the children?

If you wish the children to benefit from the fact that your husband is a non tax payer, then you would give the money to your husband first and he would make the gifts?

http://taxaid.org.uk/info/inheritance-tax/income-tax-and-gifts-from-parents

Do you wish to have all the children's savings in cash? For a ten year= time scale you might wish to consider unit/investment trusts?

Speculator

lilylaren wrote: »

5. Is there any change to the rule if a parent (my husband) does not pay tax as he earns under the tax free allowance?

I dont want to do anything wrong!

Thank you!!

I spoke to HMRC last month about this and they confirmed that 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.

Speculator

lilylaren wrote: »

additionally i have also just set them each up a childrens savings account for barclays and was going to put £5000 each from inheritence for them. (the rate pays 1.5%)

I recommend the Lloyds/Halifax or TSB young saver a/c.

Pays 3%, up to £20,000

Tammer

Hi,


I took out a CTF for my son (now nearly 4). I invested in an investment trust (a stockmarket investment) as I wanted to use the Child Trust Fund to teach him about saving and to get him used to numbers.


I can understand why you're confused as there are lots of options. Why not invest some of the inheritance in stockmarket investments within a Junior ISA for the child that has one, and for the other when CTFs can be transferred to an JISA (as I'm assuming they are just cash JISA and cash CTF)? There are risks involved, sure, but by investing in a savings account with Barclays you are GUARANTEED to lose money (via inflation).


T