Savings for your children's future 30 September 2007 at 3:06PM in Savings & investments 10 replies 1K views

Essex_Boy_3

Hi, I have a CTF voucher to invest and we are going to follow the advice given re the Britannia BS account. We also want to set up a second form of savings that we as the parents have control over.
We expect to invest £50-£100 per month and do not expect to access this for a minimum of 18 years.

Should we be looking at a mini ISA or should we be looking at something different? Some of the regular savings accounts seem to offer higher if short term interest rates?

Any advice would be appreciated.
Thanks

lynn_m21

Hi

I am a long way from being an expert on this, but we are investing in a similar way to you.

I am putting £100 a month in the a halifax children's saver which pays 10% but chucks the money out into a normal halifax childrens a/c after a year. I then take the money and put it in an account where i can reinvest in the halifax children's regular saver, to keep getting the 10% interest.

I am doing this until I come up with a better idea, so I'll be very interested to see what other replies you get - hopefully from people who do know what they are doing - lol!

The money is in the kids name but I am the nominee so I can take the money out and so on. It is intended to be their university fund (or house deposit fund).

Lynn

save-a-lot

Hi

We have an account with the Halifax called Save4it and it pays 6.05%

http://www.halifax.co.uk/savings/save4it.asp

it has a ceiling of £5K on the total amount that can be saved into it, our plan is to max it out then move on to something else. It is a passbook account.

I have been doing some reading, but not enough to advise here, but starting a pension for your child is a really good thing to do. Maybe something to research a bit though first.

agal

save-a-lot wrote: »

Hi

We have an account with the Halifax called Save4it and it pays 6.05%

http://www.halifax.co.uk/savings/save4it.asp

it has a ceiling of £5K on the total amount that can be saved into it, our plan is to max it out then move on to something else. It is a passbook account.

I take it you realise that HMRC are going to tax the interest on this account as if it was yours? i.e. £5000 at 6.05% = £302.50 p.a. which is more than the £100 allowed. See here http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10014128

save-a-lot

agal wrote: »

I take it you realise that HMRC are going to tax the interest on this account as if it was yours? i.e. £5000 at 6.05% = £302.50 p.a. which is more than the £100 allowed. See here http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10014128

I disagree, the way I read it is that the annual contribution (inc. any interest) needs to remain below the threshold....

...children, like adults have a personal tax allowance of £5,225 for the tax year 2007-2008. This is income they can receive tax-free. As long as their annual income (including interest) is below this amount...

So, if contributions into the Save4it account are made over a number of years and eventually the £5000 ceiling is reached then there ceases to be an annual contribution into it apart from the interest. So surely that will be tax free.

Correct me if I am wrong.

jem16

Children do have a personal allowance just like anyone else.

However the point here is that the money comes from the parent and is then treated differently.

Giving money to your children or investing on their behalf
You can give a child or invest on their behalf as much money as you like. But if you're a parent or step-parent and the money you give your child earns more than £100 interest a year, this interest will be taxed as if it were your own.

The £100 limit only applies to parents and step-parents. Grandparents and other adults who give money to children are not liable to pay the tax if the interest exceeds £100 a year.

It's basically to stop parents using their children to earn more tax-free interest for themselves.

save-a-lot

So filling in the R85 is the answer then to allow the child to receive tax free interest?

Judi101

You do need to complete an R85 to stop teh interest on the child's account from getting taxed but jem16 is correct. If the chlild earns more than £100 gross interest a year from money given to them by their parents its taxed as if it was the parents money and should be declared to HMRC.

save-a-lot

OK, so I suppose it may be a better idea to shift some money into the CTF annually from the Save4it account to avoid paying tax on savings. I know this will tie the money up, but that is no bad thing.

vagasv1

am I correct in thinking. This is all 'for instance'

Year 1. I pay £1000 into my childs @ 10% = interest of £100 - no tax
year 2. I pay another £1000 into my Childs account total 2100 @10% = interest of £210

do I pay tax on £210 or tax on the interest of the capital that I have paid in that year. = no tax again because it is just £100

tishme

I am not an expert with the children's regular saving account @ 10% AER per year however the full amount of £1000 will not be in the account for the whole year so interest will not amount to £100 as you thought.

Regards
Ali