can i loan my child money

IanManc

baron777 said:

last year i came into some money and decided to put some of it, £3000 into my childs HSBC account because it was paying 2.5% interest, 
my daughter has just tried to move the money back to me and the bank have frozen her account, and wont tell us why.
am i allowed to loan money to my child, or do i have to say its a gift, and then they gift it back to me
any advice would be appreciated, thanks

baron777 said:

hi she is 14, and its a HSBC savings account rate at 2.5%,  i have just found this interesting article to prove that its not (ileegal) wont let me post the link, so i will type it. thisismoney.co.uk/money/experts/article-4025172
i accept that banks are clamping down a lot on fraud at the moment, (as people are struggling financially due to the pandemic)  but this has left me feeling like i have done something wrong, when its more likely that the banks fraud department are being hugely overcautious. 

You have done something wrong. You've put your money into a child's account, pretending that it is the child's money, to get an interest rate which the bank wasn't offering to adults. You didn't really lend the money to your daughter. You've just made that up.

aroominyork

Also, from HMRC's perspective they want to ensure people do not use their children's accounts to avoid exceeding the Personal Savings Allowance and having to pay tax on the interest earned if the money had been in their own accounts.

jimpwarsop

All of this for £75 pa.

Nebulous2

kidmugsy said:

I am under the impression that one can't lend money to a minor since they can't agree to repay it.  Is that wrong?

You can certainly loan money to a child. Parents have been doing that for decades, advancing pocket money to buy big items for example. Some of them actually pay it back. What you can't do is enforce it legally as they aren't seen as having the capacity to enter into a contract. As a result companies wont enter into contracts with minors, or they can take your mobile phone and walk away. Parents tend to have other levers to use to get repayment rather than going to court. 

pphillips

Nebulous2 said:

kidmugsy said:

I am under the impression that one can't lend money to a minor since they can't agree to repay it.  Is that wrong?

You can certainly loan money to a child. Parents have been doing that for decades, advancing pocket money to buy big items for example. Some of them actually pay it back. What you can't do is enforce it legally as they aren't seen as having the capacity to enter into a contract. As a result companies wont enter into contracts with minors, or they can take your mobile phone and walk away. Parents tend to have other levers to use to get repayment rather than going to court. 

All rather nebulous really 😁. What are you saying about the OP's question?
They are purporting to enter into a genuine loan agreement with their child because of the bank's favourable interest rate!

MEM62

baron777 said:

so just a bit more information my daughter has has this account since she was 9, and then it became a current account when she was 11, if they wanted to close the account then thats fine, i probably would not want my daughter to be with a bank that treated her the way they have done, i dont bank with HSBC as my main account, but i do have a first direct account, which again i opened because it had a linked saver paying 3%, which i made interest from 

All the conversation about whether the parent can lend money to their child is irrelevant as it was never intended to be a loan in the first place.  The money was only placed in her account so that the parent could benefit from the interest rate.  It is interesting that the OP takes objection to way that the bank treats his daughter but appears to have no problem with his own behaviour in miss-using her account and causing the issue in the first place.    

eskbanker

MEM62 said:
miss-using her account 

Ah, yes, from the Uxbridge English Dictionary

miss-use
verb. To use something in the wrong way with the aid of an unmarried girl.

steampowered

It may be that the bank are concerned about money being taken away from the daughter for the benefit of the parent - rather than about the interest paid.

As the bank sees it, it's the daughter's money.

xylophone

As the bank sees it, it's the daughter's money.

It is the daughter's money - it is in her account and the OP freely placed it there.

cloud_dog

Whilst I cannot condone the likely reason for undertaking the action taken, the money is held in trust with the parent the trustee (I image) and therefore the trustee has the right to withdraw the money to use appropriately for the child.

Perhaps they have already bought her a £3000 bike on their CC and now require the money to repay the debt.