Parental investment limit problem

caliban_2

We've just withdrawn our children's National Savings Bonus Bonds to invest elsewhere as the issue they were in was returning <4%. The original bonds were presents from their grandparents and we still have the paperwork that shows this.

I've read on this site that interest on money we invest on their behalf would be taxed when it reaches £100 per annum. We don't want that to happen as the money we are no re-investing isn't ours - it is the children's.

Are there steps we need to take to establish this officially?

Thanks

telly-addict

I think if you keep all the paperwork as an audit trail so that you could prove the funds originated from the grandparents you should be ok.

realaledrinker

The limit is £100 per child per parent, so this is effectively £200 per kid in most circumstances.

I always wonder just how closely Mr. Brown monitors all this, especially as I no longer have to submit a full tax return.

telly-addict

The banks are required to provide details of bank interest paid directly to the Inland Revenue. Presumably there is some level of interest above which they report, so that they can then compare the banks' figures to those reported via the tax return.

PaulKaye

What is not clear to me is whether children have a personal allowance or not. Martin's site specifically says they do, but then there's this £100 limit. Does this kick in after the personal allowance? Does anyone know?

ReportInvestor

On income not given by parents, children have the adult personal tax allowances.

telly-addict

PaulKaye wrote:

What is not clear to me is whether children have a personal allowance or not. Martin's site specifically says they do, but then there's this £100 limit. Does this kick in after the personal allowance? Does anyone know?

Everyone has a personal allowance and ordinarily the interest on their accounts and any other income is set against this.

When children have income that is derived from capital provided by their parents, up to £99.99 of it is assessed on the child. If it is greater than £100 it is assessed on the parents. They could still have income from other sources that will be set against the personal allowance, but the income (> £100) from the parents' gift will not be.