£100 interest limit on kids savings before it's all taxed as if it were the parents

abfabally

Say gave my son (5 years old) just over £2000 total in previous tax years.  I understand there is a rule that if he gets more than £100 interest from money given by a parent, then all the interest is taxed as if it is the parents. Due to the recent interest rate rises, it could push him over the £100 interest.  Because the £2000 was given in *previous* tax years, would the over £100 interest this tax year it get taxed as if it were mine?  I would have thought that the £100 interest rule is ONLY for cash given in that tax year…otherwise it is very very restrictive!   

thanks

tripled

Anything over £100 each year will come out of the parents' personal savings allowance, assuming there is any available, and then be taxed. It's to stop parents using kids savings accounts to dodge tax.

You can move it into a child ISA, it will then be exempt, and your son can withdraw it when he turns 18.

sheramber

It is the amount of interest received in the year, regardless of when the money was invested.  

However, it is included in your own Personal Savings Allowance.

https://www.gov.uk/savings-for-children#:~:text=There's usually no tax to,their own Personal Savings Allowance.

artyboy

Restrictive? You know the child could have been 'given' the money by grandparents, friends, neighbours, Jim from down the pub etc etc... it really doesn't take a massive leap of imagination to ensure there is no paper trail back to the parents and hence no tax issues to deal with 

sheramber

Putit in an Junior  ISA  and the interest is non taxable.

Band7

sheramber said:

Putit in an Junior  ISA  and the interest is non taxable.

I was going to suggest this myself but then I remembered that you can't withdraw any money from a JISA before the account holder is 18.

Band7

abfabally said:

Say gave my son (5 years old) just over £2000 total in previous tax years.  I understand there is a rule that if he gets more than £100 interest from money given by a parent, then all the interest is taxed as if it is the parents. Due to the recent interest rate rises, it could push him over the £100 interest.  Because the £2000 was given in *previous* tax years, would the over £100 interest this tax year it get taxed as if it were mine?  I would have thought that the £100 interest rule is ONLY for cash given in that tax year…otherwise it is very very restrictive!   

thanks

Which kids account pays more than 5% interest? How much interest does your son actually get? How much of the £2,000 was given to your son by his parents (as opposed to by relatives etc)?

xylophone

See 
https://forums.moneysavingexpert.com/discussion/comment/79816452/#Comment_79816452

The rule applies per parent per child.

surreysaver

Band7 said:

abfabally said:

Say gave my son (5 years old) just over £2000 total in previous tax years.  I understand there is a rule that if he gets more than £100 interest from money given by a parent, then all the interest is taxed as if it is the parents. Due to the recent interest rate rises, it could push him over the £100 interest.  Because the £2000 was given in *previous* tax years, would the over £100 interest this tax year it get taxed as if it were mine?  I would have thought that the £100 interest rule is ONLY for cash given in that tax year…otherwise it is very very restrictive!   

thanks

Which kids account pays more than 5% interest? How much interest does your son actually get? How much of the £2,000 was given to your son by his parents (as opposed to by relatives etc)?

My child's Principality Learner Earner pays 5.15%. It will earn over £100 in interest this year.

abfabally

Band7 said:

abfabally said:

Say gave my son (5 years old) just over £2000 total in previous tax years.  I understand there is a rule that if he gets more than £100 interest from money given by a parent, then all the interest is taxed as if it is the parents. Due to the recent interest rate rises, it could push him over the £100 interest.  Because the £2000 was given in *previous* tax years, would the over £100 interest this tax year it get taxed as if it were mine?  I would have thought that the £100 interest rule is ONLY for cash given in that tax year…otherwise it is very very restrictive!   

thanks

Which kids account pays more than 5% interest? How much interest does your son actually get? How much of the £2,000 was given to your son by his parents (as opposed to by relatives etc)?

It's mostly all from me...I said £2000 for the sake of argument/to illustrate the issue with some of the newer 5% rates. It's actually a bit more (not loads more, maybe £4k total). He has £2k at 3% Santander mini 123 that has sat there for years. Halifax kids savers at 5%, and some in a normal Halifax account at 2%, and Leeds BS now does 3.9%. I've calculated when each would mature and by how much, and I think it'll push him over the £100 limit by a few ££ this year, and by quite a bit more next year if I keep up full contributions to his old and new regular savers at the same rate!

pip895

artyboy said:

Restrictive? You know the child could have been 'given' the money by grandparents, friends, neighbours, Jim from down the pub etc etc... it really doesn't take a massive leap of imagination to ensure there is no paper trail back to the parents and hence no tax issues to deal with 

Does it make any difference what the paper trail is - surely you get taxed regardless of who gave them the money??