Grandchildren regular savings

PeterPortsmouoth

Good afternoon. My wife and I are very confused about the tax implications of making donations to our grandchildren. FYI we have two grandchildren. One aged 2. One aged 7 months.

What we want to do:
Open a childrens regular savings account for each of them.
Pay about £50 pcm into each of the two accounts.

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

BUT we are confused about the tax implications.

We read:
https://www.moneysavingexpert.com/savings/child-savings-tax-free#halifax2

"Yet there is one fly in the ointment...

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. "

?Does this mean that once the savings get large enough to generate more than £100 per year interest it will be taxed at the rate paid by our grandchildrens parents?

Also, to add to the confusion, what would happen if our daughter or son in law contributed to the childrens saving account? Would that then push the whole lot over into being taxed at the rate paid by them?

It seems very very confusing to us.

Thanks for any help.

sheramber

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. "


Note the brackets - not grandparents etc/B]

Interest on the money you put in the account is not taxable on the parents and the child will have his own personal allowance to set against it.

Any interest arising on money the parents put in will be taxable as the parents' income if interest is over £100. This is to avoid parents investing money is a child's name to avoid tax.

So you need to keep evidence of the money you put in the account- bank statement etc so that the interest can be treated separately.

enthusiasticsaver

Are you investing in an account that is automatically signed over to the child at 18? We pay into a Junior ISA for our granddaughter and will do the same for our new grandchild when he or she is born next year. A lower amount each month than you do though and our daughter and son in law also pay in but we are reluctant to put more in as the child will have total control of what could be a very large amount of money at a relatively young age. I was going to increase in line with inflation but have decided against it for now.

Stochasticity

As sheramber says, any interest will be taxed based on your grandchildren's income tax position.

Unless your grandchildren are precocious child actors, that means they are very unlikely to pay any tax at all.

However, do give some thought as to what the money you give is likely to be used for in the end.

With your grandchildren both being so young, if the money you give might eventually be used for university, a first car or a first house, then it would probably make sense to invest the money, not to leave it in cash.

And if the money you give will not be needed by them until age 18, then it would probably be best to invest the money into a Junior ISA (if their parents are not already fully using the allowance), to put the investments beyond the reach of the taxman indefinitely.