Kids’ savings accounts in my name - how?

divingeggie_2310

Hello. So I opened Nationwide children’s savings accounts for both my girls when they were babies. The passbook has my name on it and the words “on behalf of [child’s name]”.
There is 55k in each, mainly grandparents lifetime gifts and an inheritance. 

It was only when I queried the amount of tax I’m paying via PAYE with HMRC that they told me they are including the interest earned on these two accounts. I checked with Nationwide and they confirmed the accounts are indeed in my name! What?! 

If I now open two new kids accounts and transfer the £55k each to them it will look like a lifetime gift from me - am I right? As I say, most of the money came from grandparents some time ago but I don’t think I can prove that. 

I can’t decide what to do to lower the tax burden to me, but equally for them. It’s a mess and I feel mislead by Nationwide. 

Can anyone help? 

MikeJXE

Personally I would talk to HMRC but I’m no expert 

p00hsticks

how old are the children ? 
I think that it's always been the case that any interest earned over a certain amount (£100) in a child's account is taken by HMRC  to be the parents - it's a rule to stop parents avioding paying tax on their savings by putting into into their young childrens names. 

divingeggie_2310

Thank you for your reply. They are 16 and 20! But we didn’t want the 20-year-old to know about the money til she graduates next year. 

I know we’ll just have to let her have it now, but I’m concerned this looks like a lifetime gift from me when it was her money in the first place! Arghhh. 

DRS1

p00hsticks said:

how old are the children ? 
I think that it's always been the case that any interest earned over a certain amount (£100) in a child's account is taken by HMRC  to be the parents - it's a rule to stop parents avioding paying tax on their savings by putting into into their young childrens names. 

I think that is only where the money originally came from the parents.  If it came from the grandparents then it does not apply.  However here it seems there is a mix and no way to prove who gave what.

Keep_pedalling

You are being charged because any interest over £100 on a children’s account where the money has been provided by a parent is taxed as it still belongs to the parent. This is to stop parents dodging IT by putting savings in the child’s name. Nationwide have not misled you you have simply not been aware of the tax rules.

It Is now down to you to show that the money was not from you but from their grand parents. These are not really suitable accounts for an inheritance, they should be held in trust.

QrizB

divingeggie_2310 said:

Thank you for your reply. They are 16 and 20! But we didn’t want the 20-year-old to know about the money til she graduates next year. 

I know we’ll just have to let her have it now, but I’m concerned this looks like a lifetime gift from me when it was her money in the first place! Arghhh. 

If the 20yo is a student, she probably has low enough earnings to avoid paying tax on savings interest.

It's up to you to tell her, or keep paying tax on her behalf.

wmb194

Unless you have power of attorney you won't be able to open an account for an adult anyway.

DRS1

Smart Limited Access | Nationwide

I am not sure if this is the account you opened but if not it would be a good idea to look for the terms of the one you did open.
In particular note the language near the top which reads

"If the account is opened by an adult, the adult will be acting on behalf of the child (as a ‘bare trustee’). Although the account is in the name of the adult, the money in the account is held for and belongs to the child. As a ‘bare trustee’, the adult will have duties and obligations to the child (for example, the adult will need to act in the best interests of the child). "

This language may stop you worrying about making a lifetime gift NOW to your daughters.  The money will always have been theirs.

Oh and by the way the £100 rule only applies to minor children so for the 20 year old you may have a decent argument that none of that interest should be treated as yours (possibly for last tax year as well as this one).

If you want to untangle who gave what then using old statements to see where the money came in from may be useful but I am not sure what HMRC will say given the funds are all in the one pot.

divingeggie_2310

Keep_pedalling said:

You are being charged because any interest over £100 on a children’s account where the money has been provided by a parent is taxed as it still belongs to the parent. This is to stop parents dodging IT by putting savings in the child’s name. Nationwide have not misled you you have simply not been aware of the tax rules.

It Is now down to you to show that the money was not from you but from their grand parents. These are not really suitable accounts for an inheritance, they should be held in trust.

I feel mislead because Nationwide say both accounts are mine. At the very least, the older daughter’s account should have automatically become an adult account in her name (not mine) when she turned 18. 

Thank you everyone, really appreciate you taking the time. 

divingeggie_2310

DRS1 said:

I am not sure if this is the account you opened but if not it would be a good idea to look for the terms of the one you did open.
In particular note the language near the top which reads

"If the account is opened by an adult, the adult will be acting on behalf of the child (as a ‘bare trustee’). Although the account is in the name of the adult, the money in the account is held for and belongs to the child. As a ‘bare trustee’, the adult will have duties and obligations to the child (for example, the adult will need to act in the best interests of the child). "

This language may stop you worrying about making a lifetime gift NOW to your daughters.  The money will always have been theirs.

Oh and by the way the £100 rule only applies to minor children so for the 20 year old you may have a decent argument that none of that interest should be treated as yours (possibly for last tax year as well as this one).

If you want to untangle who gave what then using old statements to see where the money came in from may be useful but I am not sure what HMRC will say given the funds are all in the one pot.o

This amazing thank you! Miraculously I still have the account opening paraphernalia and that is indeed the correct account. It all makes sense now - even the bit about when the child turns 18 the parent has to actively change the account name into the child’s. You’re a genius DRS1, thanks again.