Halifax Children's Saver - Interest taxable?

moomintroll_3

Hi.

Opened a Halifax Children's Saver account along with a save4it account at the Halifax over the weekend and did the ID confirmation etc etc yesterday at the local branch...

Today I've received the investment certificate which has a caveat that interest payable on the account will have basic rate tax deducted unless I register to receive it gross...

My question is, as these are children's accounts shouldn't the interest automatically be received gross? Or is there some form (R85?) I need to fill in on behalf of my 14 day old son?

TIA for any help.
G

Maisie

Yes you should have filled in the R85 at Halifax (they supply them).
Ask for one to be sent to you if you're not near a branch.

The interest is not automatically paid gross to children as some lucky kids have more money than their personal income allowance for tax purposes. Tax allowance is about £100 weekly.

As I understand it if a parent gives the child the money for any account and the interest is over £100 the parent is liable for tax. Even if the child is exempt.
Does not apply if grandparents or others supply the money for child. I'm pretty sure that's correct info but no doubt someone financially wiser will advise.

Maisie

ps. You will need R85 for each account.

telly-addict

Maisie wrote:

Yes you should have filled in the R85 at Halifax (they supply them).
Ask for one to be sent to you if you're not near a branch.

The interest is not automatically paid gross to children as some lucky kids have more money than their personal income allowance for tax purposes. Tax allowance is about £100 weekly.

As I understand it if a parent gives the child the money for any account and the interest is over £100 the parent is liable for tax. Even if the child is exempt.
Does not apply if grandparents or others supply the money for child. I'm pretty sure that's correct info but no doubt someone financially wiser will advise.

Absolutely correct. Interest over £100 is assessed on the parent. Used to be S660(B) ICTA 1988, not sure if it has the same statutory reference now. Now found it: s 629 ITTOIA 2005.

If your child is likely to be receiving big gifts of cash, it is worth considering keeping parents and other gifts separate in separate accounts, or alternatively, keep a note next to the entry in the passbook as to who gave the money.

Cook_County

If both give it is up to £200 tax-free

jo_b_2

When I opened my account the other week, I was told that I no longer had to complete the R85 form and that the account could be registered as 'gross' on the computer when opening the account.

Did anyone else have the same advice? I don't want to have the time and trouble of having to claim back tax if the advice was wrong.

System

jo_b wrote:

When I opened my account the other week, I was told that I no longer had to complete the R85 form and that the account could be registered as 'gross' on the computer when opening the account.

Did anyone else have the same advice? I don't want to have the time and trouble of having to claim back tax if the advice was wrong.

I opened my account a couple of weeks ago and was given the R85 to complete. To be honest, i wouldnt trust that peice of advice. Download the form off the IR website and post it to them just in case.

http://www.hmrc.gov.uk/taxback/forms.htm

skylight

Okay - confused. (thats just me).
If I pay £100 per month into this account - my daughter is tax free but I may have to pay tax on the interest if the years interest is over £100???

BUT if my Dad (grandad)were to pay £100 per month in then he doesn't pay any tax, neither do I nor my daugter?

And if I pay £100 into my Dads account and he pays it into this account do he or I pay tax on that???????

Argghhhhhh

And even if were were paying tax, how much or how is it worked out (considering I am self employed and lucky to make £5k this year.)

jo_b_2

Judi wrote:

I opened my account a couple of weeks ago and was given the R85 to complete. To be honest, i wouldnt trust that peice of advice. Download the form off the IR website and post it to them just in case.

http://www.hmrc.gov.uk/taxback/forms.htm

Excellent advice! I just telephoned the Inland Revenue helpline (0845 9800645) from the link you gave. I am too tight to print off forms if I don't need to!

She said that the branch would need to have a copy of a signed R85 on record in case they were audited and that, if not, the Inland Revenue could reclaim the tax on the interest! Halifax staff! :rolleyes:

Maisie

I used to work in a bank and we were not allowed to register anyone for gross interest unless we had the completed R85. Also the parent or guardian had to sign the form for the child. Not the grandparents or anyone else opening the account.

dealseeker

charlotte664 wrote:

Okay - confused. (thats just me).
If I pay £100 per month into this account - my daughter is tax free but I may have to pay tax on the interest if the years interest is over £100???

BUT if my Dad (grandad)were to pay £100 per month in then he doesn't pay any tax, neither do I nor my daugter?

And if I pay £100 into my Dads account and he pays it into this account do he or I pay tax on that???????

Argghhhhhh

And even if were were paying tax, how much or how is it worked out (considering I am self employed and lucky to make £5k this year.)

Inland revenue would hammer you if they caught the tax evasion route of you effectively sending your deposit via your dads account - although a nice idea and wouldn't be too difficult to hide the trail.....

Remember £100 lmit applicable for all income generated by Child from deposits made by a parent into any savings accounts in the tax year.

1 Make contributons from each of the parents say from a joint account (so effectively £200 interest before breaching the threshold). (See above)
2 Next best route is through gransparents etc. but don't get caught. :eek:

3 If interest going over the £100 / £200 limit in the tax year ( 12 months to 5th April) then simply lower the monthly standing order to ensure interest will fall below this level.

Tax payable is based on your earnings. Given £5k income you would be payable at your marginal rate of tax which I believe would be only 10% (taking account of personal allowance).

So for example - Interest received by little johnny in year £108 which is over the over the £100 limit. This is ALL taxable at parents tax rate (say 10% in your case). So tax payable £108 * 10% = £10.80.

Hope this helps.