Children Savings

ahfat41

I save £500 a month for my grandson for his education. As the money comes from me and not his parents is he entitled for £1000 free interest? Thanks

eskbanker

ahfat41 said:

I save £500 a month for my grandson for his education. As the money comes from me and not his parents is he entitled for £1000 free interest? Thanks

If the money is in your grandson's name then he can earn up to £18,570 in annual interest before he'd be liable to pay any tax on it - a small part of that could eventually be the £1,000 personal savings allowance but realistically he's more likely to be using his main personal tax allowance.

https://www.moneysavingexpert.com/savings/tax-free-savings/

This assumes that the money isn't in a junior ISA, which takes all tax out of the equation....

cwep2

xylophone said:

The OP should also take note of the "£100 rule" relating to income/interest on gifts to his minor unmarried children.

 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. 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 .

 The £100 rule does not apply to parental gifts into JISA.

Question on this:
I originally set up a monthly kids saver for my (pre-primary age) kids at Halifax many years ago, total in account built up to £1200 each, obviously the interest back then and on this size was well below the £100 limit. This was >3yrs ago (probably 6-7yrs).

Since then the only money that's gone in has come directly from grandparents, but obviously the pot is now a mix and the total interest is likely to nudge above the £100 limit. Is there any time limit or taper on that 'gifts from parents rule'?

I can of course put it into a JISA, but want to make sure I'm reporting my tax correctly.

anxiousnow

beancounter80 said:

Hi
I trying to work out what’s best to do with savings for my kids. 

I put £100 per month into an account, currently it’s in a Santander account in their name but it only pays interest upto £2k. It currently has £5k in so aware it’s not earning anything on £3k. All the accounts either only pay on small balances or can’t be managed online.

Bit lost as to what is the best approach to take so any advice would be appreciated.

Halifax Kids' Monthly Saver accepts between £10 and £100 per month and is currently at 5% fixed for 12 months. This would be a good option for your future £100 per month pay-ins.

The other money above your 2k interest rate threshold you could put into a JISA either cash or stocks and shares. Coventry has the best rate JISA at the moment according to MSE. 

xylophone

Question on this:

Something else to bear in mind - the rule applies per parent per child.

With regard to the split parents/other, strictly speaking yes, the interest arising should indeed be split between parents' gifts and gifts from others.

Many years ago, there was guidance from HMRC as to how this should be done.

With regard to time limit, the rule applies to gifts to minor unmarried children.

I'd have thought have thought that using the JISA option for gifts from parents would be the easiest option?