The plan for saving for your child help!

deefadog

Ok, i have recently starting saving for my 7 month year old girl, i thought this would be easy, but from what i have read here it's a mine field!

I would appreciate a plan of attack, as i am very confused. I don't want to argue which companies pays better interest than others, rather a general strategy to better saving.

What i think i know already -

CTF - Tax free, but you have no control over the money, so i don't want to plough all the savings into this. but I will top it up every month. (this will be my daughters fun money).

Tax free children's savings accounts - This will be my main savings pot (putting around £1500 per year into it), but from what i have understood, once you save around the first £1500 or so the tax will amount to over £100 a year so it will get taxed! - is this correct?

If it is I may as well put all the savings into an cash ISA!

Any help will be much appreciated!

deefadog

Can anyone help me with this please? i need to get this sorted this weekend

Cheers

grumbler

deefadog wrote:

Can anyone help me with this please?

You do not have any replies because it is difficult to understand what help you need :mad:

CTF - Tax free, but you have no control over the money, so i don't want to plough all the savings into this. but I will top it up every month. (this will be my daughters fun money).

O.K. Is there any question here?

Tax free children's savings accounts .... once you save around the first £1500 or so the tax will amount to over £100 a year so it will get taxed! - is this correct?

Yes. For about 5% interest rate the exact amount of savings is about £2000.

If it is I may as well put all the savings into an cash ISA!

YES!

deefadog

I see, I just typed what was in my head after a review it was confusing.

Ok, What is the best way to save for my child for the next 18 years to gain the maximum interest?

Cheers

cloud_dog

Deefa, I have just gone through a similar process.

What my daughter now has / will have is the following:

a) Cash savings: Nationwide. Birthday, Christmas money, some top-ups, etc goes in here.

b) CTF: Family Investments (primarily because the underlying investments are with New Star). The Idea will be to top it up occasionally (as and when I have spare cash) up to a point where there is approx £2k in the fund, then hopefully the investments will keep growing over the remaining 15ish years.

c) Have set up a regular monthly investment saving into a fund. This is done within my wife's ISA Funds Network investments (yes, I know it uses up some of her allowance but we don't tend to use our allowances so not aproblem). This is how I get around not worrying about the £100 limit, etc, etc. Again with the idea of getting a few thousand invested and allowing it to grow (hopefully).

I am very comfortable with risk and if we (daughter) ends up with less than having put it in a Building Society I will be a) suprised b) 'thats life'. I utilise MS Money heavilly and the investment in my wife's ISA account is 'taged' as being for our daughter, with the idea that (as you said) her CTF will be for her to do with as she pleases, hopefully she will have a degree of financial sanity, and the 'in name' ISA investment will be for us to help her. How this will manifest itself we will wait and see.

cloud_dog

deefadog

Thank you cloud_dog, that's exactly the answer i wanted

Ok, this is my plan, please pick me up on anything i may have got wrong.

1) "Savings" for the first year, we will put all savings into a good child's savings account, until we reach the tax limit! (as you can get a slightly better rate than an ISA)

Then once we reach the tax thresh hold, put this into an ISA (utilizing the wife ISA allowance, as yourself)

Question - Would I be right in thinking that, once i transfer the money to the ISA from the savings account, i can start again with the savings account (as the interest is better than the ISA), and again transfer the money to the ISA when the tax limit is approaching? So using the savings account to it's maximum (tax free) and then moving that to the ISA for future (tax free) storage as it were this way i can avoid paying tax for the next 18 years! (If things stay as they are).


2) "CTF" - same as yourself, we have chosen the Britannia for the next 2 years, as it's 6%! - a small standing order from myself and other family members will be topping it up monthly!

How does this sound - a good plan?

isasmurf

I would be cautious about using your, or your spouses, ISA to save for your child. The money remains the ISA holders money, and when you eventually draw out of the ISA and give it to your child this would be considered a gift. As such it could be liable to tax.

I don't know what the tax position would be on this today, but even if there would be no tax under today's laws a future government could introduce tax on gifts between family members. It's worth bearing in mind.

deefadog

Thanks isasmurf! good point, but i can't see any other way to save for my child tax free!

Any suggestions?

Also apart from your point, is my plan a good one?

cloud_dog

deefadog wrote:

Thank you cloud_dog, that's exactly the answer i wanted

Ok, this is my plan, please pick me up on anything i may have got wrong.

1) "Savings" for the first year, we will put all savings into a good child's savings account, until we reach the tax limit! (as you can get a slightly better rate than an ISA)

Then once we reach the tax thresh hold, put this into an ISA (utilizing the wife ISA allowance, as yourself)

Question - Would I be right in thinking that, once i transfer the money to the ISA from the savings account, i can start again with the savings account (as the interest is better than the ISA), and again transfer the money to the ISA when the tax limit is approaching? So using the savings account to it's maximum (tax free) and then moving that to the ISA for future (tax free) storage as it were this way i can avoid paying tax for the next 18 years! (If things stay as they are).


2) "CTF" - same as yourself, we have chosen the Britannia for the next 2 years, as it's 6%! - a small standing order from myself and other family members will be topping it up monthly!

How does this sound - a good plan?

I wrote a load, then re-read your post and came up with the below..........

It is only *your / your partners* money that counts toward the £100 tax limit on interest earned. So, if for example savings deposits (cash, SO, etc) came from the grandparents account(s) then there is no tax liability - worth thinking about ;-) although do *not* try and beat the taxman (cover my ar*e). So.........

a) deposit your/your partners money into your Childs CTF and/or your wife's ISA
b) deposit everyone else's money (and some of yours if you want) into the ordinary savings account

Obviously I don't know about amounts but, this way you won't have to do any shuffling of monies between accounts.

cloud_dog

oh, yeah forgot. Isasmurf makes a valid point but it is something I feel very comfortable about 'working around'.

deefadog

Thanks, that's great advice!

*This is so confusing* :mad:

Once again when i re-read my post i found it to be a bit wrong as taking the money out of the savings account before the £100% limit and putting into my or my wife's ISA would be good cause for the Tax man to ask questions!

Your way is alot better

Can the grandparents have a standing order or direct debit into the child's savings account? And yep get you on the Beat the taxman, ar*e covered

So in practice on the savings account say @ 5% we as parents can deposit £2000 a year into the account and everyone else can put what ever they want (monthly limits allowing and her tax allownace of course)!

With the CTF, does the same £100 interest clause apply again?

*I got to get all ths down an excel doc straight away before i foget it all! *

cloud_dog

With the ordinary savings account you could deposit £2k (with interest @ 5%) if you wanted to, and everyone else can deposit pretty much what they like; by Standing Order will be even better. I think there are tax implications but I think this relates to inheritance tax and at the back of my mind I think you can give away £3k each year - would need to investigate this further but I haven't as I'm not in that position).

The CTF is limited to £1200pa (from everyone) and excludes the voucher amount (for the first and seventh year - assuming they do the top-up).

cloud_dog