Childrens savings - £100 interest limit when gifted from parent

busy_dad

Just a quick question regarding children's savings. I understand that if a parent gifts money, there is a limit of £100 interest which can accrue annually before it is added to the parent's taxable income.

What I am not clear on is if this £100 limit applies on a 'per child' basis or is taken cumulatively across all children if you have more than one?

xylophone

Per child, per parent.

Below is pre current system where interest is paid gross on all accounts but the rule remains the same.

http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/families/babsi.htm

There are special rules if the savings have been given by a parent. If gifts from a parent produce more than £100 gross income a year, the whole of the income from the gifts is normally taxed as that parent's income. A child cannot get back any tax on that income. Nor can interest paying accounts be registered to have interest paid without tax taken off.

The £100 rule applies separately to each parent

The £100 rule applies to income arising each year. It does not matter whether the money in the account is comprised of part capital and part added interest. The £100 rule applies as long as income is over £100 in any one year for any one child from one parent.

For example

If a parent gives a child £2,000 which earns £98 interest the interest belongs to the child for tax purposes and the account can be registered for gross interest. But if the £98 is added to the account, leading to £101 interest being earned in year 2, the interest has now exceeded the £100 limit. This means it now belongs to the parent for tax purposes and the account cannot remain registered gross. If the account holder asks they should be told to cancel the registration.

The £100 rule does not apply TO CTF/JISA.

busy_dad

Thanks Xylophone, very helpful.

This may be a silly question, but if gifting money from a joint account in both parents' names, would this be classed as 50% from each parent? - and therefore effectively increasing the interest limit to £200 on the total?

It seems obvious, but when it comes to taxation I have learned to take nothing for granted!

alandaniel132

only need pay extra tax if personal income less than £11,850,
https://www.gov.uk/income-tax-rates

if your personal income less than £11,850 per year, do not need to pay any extra tax on interest (even above £100)