Regular saver query

CricketLady

Hi, my daughter (23, still living at home and working full time, salary 28k) has a Lloyds regular saver maturing next week, and she says that she won't be opening another one as she can't afford a further £400 per month now that she has various other regular savers earning more (10.38%, 8% and 7%).  She's going to move £4000 of it to her LISA then recycle the rest into her other regular savers and let this Lloyds one slide.

This got me thinking - if she did open another, I have enough savings to be able to pay the £400 per month for her, and then she simply collect the interest and pay me back the £4800.  (When I mused on this, she said, "but if you're paying the amount, you should keep the interest".  I'll come back to this.)  

This has raised various questions - I'm aware that it might look like I'm giving her a gift, as the money would come from the joint account held by my husband and myself, and I'm not 100% clear on inheritance tax, but I think I'd only be allowed to give her £3000 anyway, even though this isn't a gift, it's effectively a loan which she would then pay back from her Lloyds to our Barclays when it matures NEXT October.  

But is this legal to do?  I know it's my money and I should be able to do with it what I want, but I don't want to fall foul of any tax legalities.

In case this is relevant I am self employed but only make about £600 per year as I'm mainly a housewife.  I get the full £18570 personal allowance and make about £6000 per year in savings interest so don't pay any tax.  Hubby is a higher rate tax payer with a salary of £98k, My daughter earns about £500 per year in interest and pays the lower rate of tax.  Hubby is 55, I'm 53 so hoping I will still last out the seven years IHT thingy, but no guarantees I'm aware!)

Any thoughts gratefully received, I suppose my question is mainly, is this legal to do (and please bear in mind, we might not do this anyway, I don't want to get either of us into trouble!)

Also, would it make a difference who gets the interest (my thinking being that a win for one of us, is a win for all of us, no matter who ultimately gets the interest, I really don't mind her having it, it just seems a shame to lose out on 6.25%).

Thanks so much!

Bigwheels1111

I moved £300 to my wifes account each month to fund a First Direct regular saver.

When it matured she moved the whole amount into my bank.

She did not pay tax.

Nobody ever asked or did anything about it.

Why should you give up the interest.

I think it would only be an issue if you passed awy before the year was up.

savergrant

Bigwheels1111 said:

I moved £300 to my wifes account each month to fund a First Direct regular saver.

When it matured she moved the whole amount into my bank.

She did not pay tax.

Nobody ever asked or did anything about it.

Why should you give up the interest.

I think it would only be an issue if you passed awy before the year was up.

There is a difference in law between spouses and parent/children financial transactions. The difficulty I think is that on opening the account you declare any money you put it in will be yours, so you can't use it to look after money for someone else. It's also hard to justify it as a loan as you don't tend to borrow money to put it in a savings account.

Voyager2002

Personally I think that the amount of trouble involved would be excessive for just 6.25 per cent...

You are free to give or lend your money to whoever you choose. In the event that you died within seven years of making a gift, the amount would be included in your estate when calculating whether Inheritance Tax would be due. If you made a loan rather than a gift then inheritance tax would not be an issue, so it would be worth documenting the fact of the loan and the terms for repayment.

Brie

You could of course write up a short document to show you are lending her the money and she needs to pay it back.  But if you are going to get the interest why not just open one in your own name?  Or is something only she can get?

Lots of parents fund their children's saving accounts so perfectly legal.

TheSpectator

HMRC normally treat interest on childrens accounts over £100 from capital from the parent as belonging to the parent. Not sure what the position is for adult children but seems an awful lot of effort that may not work.

badmemory

Just give her the expected interest.  Saves all the worry about who could object.  If you are loaning that much every month it would be far less trouble to open one for yourself.

CricketLady

You're all so kind, thank you, just a note that I should have made - I already have all the regular savers for myself.  It seemed a small thing to do for my daughter, just to enable her to keep her Lloyds going for another year.

Angelica123

CricketLady said:

You're all so kind, thank you, just a note that I should have made - I already have all the regular savers for myself.  It seemed a small thing to do for my daughter, just to enable her to keep her Lloyds going for another year.

But surely it's only really worth keeping the Lloyds regular saver going if you are gifting her the money rather than loaning it to her. Otherwise you could just gift her the equivalent sum of whatever interest you would anticipate she would have had had she kept the Lloyds regular saver going - it would have same effect but be much less complicated. 

35har1old

Brie said:

You could of course write up a short document to show you are lending her the money and she needs to pay it back.  But if you are going to get the interest why not just open one in your own name?  Or is something only she can get?

Lots of parents fund their children's saving accounts so perfectly legal.

But they don't expect it back

Jami74

She could open the regular saver and just deposit £25 a month.