Children's Savings and interest allowance

OldManLogan

I've noticed that the top rate children's instant access accounts are around 3% interest up to 5k (HSBC) and 2.25% up to 25k (Virgin), much better than the current 1.31% for adult accounts.

If I have a relatively small amount of savings (under 20k) is it possible to save 5k of this in the HSBC account and the rest in the virgin account in my son's name? (He is one years old).

I've read that if the money is given by a parent then it is taxed at the usual rate if it earns over £100 interested year, although if I'm well within my PSA anyway surely this would remain tax free anyway? Any assets etc built will be for my son in future anyway and I have money being put away elsewhere for him so I'm not concerned on that front, this just seems like a way to earn a better interest rate in the present unless I'm missing something tax related?

Any advice would be greatly appreciated, thanks.

masonic

Yes, if you are saving money that will be for your son, then it makes sense to use these higher paying accounts. As you say, if interest earned is greater than £100 per year it would be covered by your PSA you aren't using that up with your own savings interest.

Zorillo

If you do this the money will become your son's as soon as it is deposited. You wouldn't be able to withdraw it as your own. Is that what you intend?

OldManLogan

Zorillo said:

If you do this the money will become your son's as soon as it is deposited. You wouldn't be able to withdraw it as your own. Is that what you intend?

No I would essentially be using the accounts as higher interest savings accounts for my own savings, as they are easy access accounts and as my son is only one surely I am able to manage the accounts? How would the bank know what any withdrawals are used for? 
I know this is not what they are intended for but as Martin states in the article if any money earns interest then it benefits the children, as I would be within my own PSA I don't think there is any legality issues or am I missing something? 

xylophone

I don't think there is any legality issues or am I missing something? 

The money is an outright gift to your son and you hold it in bare trust for him.
https://uk.virginmoney.com/savings/products/virgin_young_saver_issue_5/

3% interest up to 5k (HSBC) 

The account does not appear to be available for under sevens? And 3% doesn't apply to over £3000. And not easy access?
https://www.hsbc.co.uk/savings/products/mysavings/

masonic

The following statements seem to contradict one another:

OldManLogan said:

Any assets etc built will be for my son in future anyway

OldManLogan said:

No I would essentially be using the accounts as higher interest savings accounts for my own savings

So are you building up assets for your son, or are you using the accounts for your own savings, which you later intend to take back for yourself? As others have stated, you can only save money for your son in such accounts, and once paid in that money (not just the interest earned on it) must legally be used for his benefit.

OldManLogan

masonic said:

The following statements seem to contradict one another:

OldManLogan said:

Any assets etc built will be for my son in future anyway

OldManLogan said:

No I would essentially be using the accounts as higher interest savings accounts for my own savings

So are you building up assets for your son, or are you using the accounts for your own savings, which you later intend to take back for yourself? As others have stated, you can only save money for your son in such accounts, and once paid in that money (not just the interest earned on it) must legally be used for his benefit.

Sorry I didn't explain that very well, I meant that I have other money put away and assets and investments for my son in the future (property etc), and so I wondered if it was possible to use the children's saving accounts to boost the interest on my savings, with the intention of then re-investing it elsewhere. 
I understand now that this isn't possible, thanks everyone for the replies and the clarification