Children’s savings and tax

iazcac

Not sure whether to post this in savings or tax, but here goes...

I am additional rate tax payer
My wife is a stay at home mum with no income
We have two children 3 and 5

We’re we to put £20k of savings in my children’s name (looking at virgin account) at 2% this would earn £400 in interest per year

I understand as this is over £100, it will be classed as the parents cash on a per parent basis and liable for tax at parents rate.

Would that mean we could use my wife’s PSA and not be liable for additional tax or would it be split between us meaning we pay additional rare as I get no PSA, or something else?

Thanks

Dazed_and_confused

My wife is a stay at home mum with no income

Would that mean we could use my wife’s PSA

No. You can only make use of the PSA (actually a 0% tax rate) if you have income of at least £17,501.

Before the savings nil rate (PSA) comes into play you have to have used your Personal Allowance and savings starter rate of tax (upto £5,000 taxed at 0%).

cloud_dog

Assuming the money was paid in from a joint account you would be entitled to two lots of £100 limits (his and hers) and in theory the remaining £200 would also be equally split and taxed at each of your highest rates of taxation.

Alternatively if records were to show, and be retained, showing the deposit was made by a grandparent, for example, no interest limit is applicable.