Kids saving into an adult fixed rate?

1236DR

I have two young children who both have savings in a kids saver getting 1.8%. Other kids accounts don't quite work as you either have to go into branch (they are disappearing quick), have an adult account or limit at the 2-3K limit. 

The question is could I transfer kids money into an adult fixed rate account (some are around 4% so could double the interest) I'm looking at and then after 12 months transfer back to them without any huge tax / gift implication?

Rheumatoid

A lot of them specify they are only open to over 18's

wmb194

1236DR said:

I have two young children who both have savings in a kids saver getting 1.8%. Other kids accounts don't quite work as you either have to go into branch (they are disappearing quick), have an adult account or limit at the 2-3K limit. 

The question is could I transfer kids money into an adult fixed rate account (some are around 4% so could double the interest) I'm looking at and then after 12 months transfer back to them without any huge tax / gift implication?

If you do that you'll be effectively stealing their money i.e. taking it out of an account in their name and putting it into one with yours. It's not something a trustee should be doing.

xylophone

Had you looked at the Saffron BS  2 year Fixed Rate Children's Bond at 4.40%?

You can apply by post.

https://www.saffronbs.co.uk/savings/childrens-savings-accounts/two-year-fixed-rate-childrens-bond

Considered the Halifax 5% Child Regular Saver?

https://www.halifax.co.uk/savings/kids/kids-monthly-saver.html

Incidentally, are you (or did you) or your spouse provide the capital?

If so, you should be aware of the "£100 Rule" (per parent, per child).

https://www.gov.uk/savings-for-children

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4300

Band7

Have a look at these. They can supposedly all be opened online

Exodi

xylophone said:

Had you looked at the Saffron BS  2 year Fixed Rate Children's Bond at 4.40%?

You can apply by post.

https://www.saffronbs.co.uk/savings/childrens-savings-accounts/two-year-fixed-rate-childrens-bond

Considered the Halifax 5% Child Regular Saver?

https://www.halifax.co.uk/savings/kids/kids-monthly-saver.html

Incidentally, are you (or did you) or your spouse provide the capital?

If so, you should be aware of the "£100 Rule" (per parent, per child).

https://www.gov.uk/savings-for-children

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4300

At first I thought 'tax on savings interest only applies to those holding princely sums' but from thinking about it more - £100 of savings interest, would only take £2,273 in the aforemention 4.4% savings before you had to start declaring it to HMRC...

I suspect that a lot of money ends up being 'laundered' through friends and family. Seems an odd exception to have.

Can't imagine how it works in practice when, over time, the funds would start to become diluted, in which some of the money was from parents, some of the money is other relatives, some of the money is from interest on interest, etc.

xylophone

Here is some guidance from the days  when an account needed to be registered to receive interest gross.

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

And more up to date

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4310

It seems to me that parents might be best advised to regard their gifts as "long term" money and subscribe to JISAs.

The children could have other child accounts to hold money from Granny and Aunt Jane.....