Prmium Bond winnings and tax on interest advice please

funguy

Hi everyone,

We regularly put savings into our children's Premium Bonds in the hope of them getting a big win one day. We know that the winnings are tax free and they get the odd win now and again.

However, if we chose not to reinvest and winnings and instead NS&I transferred the winnings to a savings account, would we as parents have to pay interest on the money in the savings acocunt? 

If we put the money into a savings account directly as parents and they get more than £100 in interest then this is charged as a tax on the parents. Would this still be the case from interest gained on the child's premium bond wins?

Thank you for any advice you can give please.

Best Wishes

InvesterJones

Yes. Where the money comes from doesn't matter, if it earns interest in the account then it's considered earned as part of the account.

funguy

Thanks for the quick reply. I guess the interest is gained from the individual child's winnings so is their income rather than the parent?  So will it be viewed as part of the child's tax (ie not taxable as only 3100 or so) or the parent as the original premium bonds were bought by the parent?

Keep_pedalling

If one of them does get a big win it belongs to that child only, so it could be a difficult for the non winning children to see their sibling get all the winnings. 

funguy

True the winnings belong to the winning child. What about the interest that is gained by that child from any winnings - does that need declared by the parent as part of their earnings or does it solely belong to the child?

Martico

In whose name is the account where the winnings are deposited?

masonic

funguy said:

True the winnings belong to the winning child. What about the interest that is gained by that child from any winnings - does that need declared by the parent as part of their earnings or does it solely belong to the child?

Since you originally gifted this money to the children, if you use a children's savings account then the first £100 interest per child would be tax free, thereafter you'd need to declare it as your interest income (assuming there would then be any tax to pay). See https://www.moneysavingexpert.com/savings/child-savings-tax-free/

An account in your name would result in all of the interest being treated as yours.

Junior ISA is an alternative option that would keep it tax free.

funguy

Martico said:

In whose name is the account where the winnings are deposited?

The childs name - its their money in that the winnings are from Premium bonds in their own name

funguy

masonic said:

funguy said:

True the winnings belong to the winning child. What about the interest that is gained by that child from any winnings - does that need declared by the parent as part of their earnings or does it solely belong to the child?

Since you originally gifted this money to the children, if you use a children's savings account then the first £100 interest per child would be tax free, thereafter you'd need to declare it as your interest income (assuming there would then be any tax to pay). See https://www.moneysavingexpert.com/savings/child-savings-tax-free/

An account in your name would result in all of the interest being treated as yours.

Junior ISA is an alternative option that would keep it tax free.

Thank you - thats what i was worried about - its not really fair in that its the child's winnings and not he parents. Be easier to just reinvest it back into their own Premium Bonds pot.