Multiple Kids Savings Accounts

Dewhirstn

Good Morning everyone,

Having received this weeks MSE round robin I was looking into the savings accounts for Kids, and I was thinking, would it be possible for me to have more than one savings account for my son?

I currently have in the region of 4k saved for him in one account, but these new kids accounts, the Saffron and Halifax ones piqued my interest in particular, only allow a £100 opening deposit.

So could I open one each at Halifax and Saffron, then set up two payments from my sons current savings account (unlimited withdrawals) for £100 into each of these account for the 12 month at 4% deal they are offering, then after 12 months transfer the money and interest back into his main account?

AnotherJoe

Why not? He could have a 100. The only issue is the limit on interest before he pays tax which you'd have to work out as it will be in multiple places..

Dewhirstn

He shouldn't pay any Tax should he?

I thought savings were Tax free under the £11500 limit?

xylophone

Re tax on your unmarried minor child's savings

http://www.moneysavingexpert.com/savings/child-savings-tax-free

If money is given by a parent or step-parent and the interest is over £100/year the whole thing is taxed like it's the parent's cash.

Money given to a child by each parent or step-parent (not grandparents, aunts, uncles etc) which generates more than £100/year in interest in normal (non-junior ISA) savings will be paid at the parent's tax rate.

The £100 allowance is on a 'per parent' basis, rather than a 'per child' basis. The aim's to stop parents using their kids' tax-free allowance for an extra allowance.

Once the child earns more than this, the whole lot is taxed at the parent's tax rate. Yet even then if the parent is within their personal savings allowance and the child's savings don't take them over, then it'd still be tax-free.

Yet if the child goes over the £100 limit and the parent is over the PSA then their savings would be taxable, in which case saving it in a junior ISA would be a tax benefit, as then it's tax-free.

http://www.charterbridgefinancialplanning.co.uk/factsheets/investing-for-children-what-you-need-to-know/

There is an important exception to the rule that a child’s income is taxed on the child. This applies where income is produced as a result of a “settlement” (which covers all gifts) made by a parent for his unmarried minor child who is not in a civil partnership. In this case, all such income is assessed on the parent unless the total gross income which comes from capital provided by the parent for the child does not exceed £100 gross in a tax year.

Dewhirstn

Thanks Xylophone, so, with a bit of quick maths, if I open two of these account. both working at 4% I should be just under the £100 maximum but will still be getting the best I can out of his savings accounts?

xylophone

But the original capital was "settled" by you- don't forget the effect of interest compounded in subsequent years.

https://forums.moneysavingexpert.com/discussion/5639650

bowlhead99

Dewhirstn wrote: »

Thanks Xylophone, so, with a bit of quick maths, if I open two of these account. both working at 4% I should be just under the £100 maximum but will still be getting the best I can out of his savings accounts?

Basically yes. But as xylophone says, you might expect this to increase over time (with further deposits or interest rate rises or whatever). For example if inflation and central bank base interest rates both increase 2-3x from current levels you might not be making much more in real terms but would be well over the £100 limit to be allowed to have the interest treated as the child's.

Two obvious things to note

- the £100 interest allowed on aggregate parental deposits​ is per parent which is helpful;
- even if it is treated as needing to be taxed on you, there may be no actual tax to pay because it can come out of your annual personal savings allowance if you're​ not filling that all with your own interest income.

Once the amounts start to be large enough to incur tax (or even before), can be useful to consider Junior ISA accounts for some of it if you don't mind the child losing access until age 18+.

Fitzmichael

I probably learned some of the compounding etc formulae but they're well rusty now and this seems the place to find someone who knows the answers. (Martin, Maybe you should have a page dealing with these calculations.)
I have 5 grandchildren 4-14 and before it's too late I want to put £1000 each into (savings) a/cs for them, not necessarily telling them straight away, and not leaving my 2 smart but busy daughters with any hassle (They live long distances away and I have all the documents).
Halifax 4% is the highest interest rate but I have to drip feed max £100/month=£? interest.
Or for the 2 oldest, Santander 3% will let me deposit the whole £1000 =£30 interest. I can't do it for the younger ones because I would have to open a Santander a/c.
Can someone give me some answers, and/or guidance as I'll probably be revisiting this in 12 months?
Thanks, from me and the kids.

xylophone

Your grandchildren would have the right to access and control of any account opened in bare trust at the age of 18.

Do they have JISA accounts? Ask your daughters.


Assuming that they have not used up their full allowances for the current tax year, it might be an idea to make your gifts into these accounts.

If your daughters gave you the account numbers/sort codes, you could make your gifts by FP.

https://www.gov.uk/junior-individual-savings-accounts/overview

Re Halifax regular savings

http://www.halifax.co.uk/savings/accounts/kids/kids-regular-saver/

under "What might the future balance be"