Invest in children's names to save on tax?

Claremac

We have sold our house and are having to go in to rented as we can't yet find anywhere we want to buy. While this isn't what we wanted to do, in the current market it now seems like not such a bad idea.

We will have £240,000 to invest while we are in rented so that the interest helps with the rent. As I am an non-taxpayer and oh is higher-rate it will need to be invested in my name. We had planned to split it among various banks and building societies bearing in mind the £35,000 limit. If we carry on renting for 12 months+ we may have to pay tax on some of the interest.

A friend has suggested that we put some of the money in our kids' names and then we could have more than one account with the highest-paying bank/BS and still be protected and also we wouldn't have to pay any tax at all.

Can anyone see any potential problems with this? As I would be the signatory to their accounts would I be officially classed as the "owner" of the account when it came to the £35,000 compensation situation?

Any advice very gratefully received.

calleyw

Claremac wrote: »

We have sold our house and are having to go in to rented as we can't yet find anywhere we want to buy. While this isn't what we wanted to do, in the current market it now seems like not such a bad idea.

We will have £240,000 to invest while we are in rented so that the interest helps with the rent. As I am an non-taxpayer and oh is higher-rate it will need to be invested in my name. We had planned to split it among various banks and building societies bearing in mind the £35,000 limit. If we carry on renting for 12 months+ we may have to pay tax on some of the interest.

A friend has suggested that we put some of the money in our kids' names and then we could have more than one account with the highest-paying bank/BS and still be protected and also we wouldn't have to pay any tax at all.

Can anyone see any potential problems with this? As I would be the signatory to their accounts would I be officially classed as the "owner" of the account when it came to the £35,000 compensation situation?

Any advice very gratefully received.

Might want to read here as there tax implications as you have given the money to the children.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10014128

Once it is over a £100 in interest you are taxed as the parent.

Looks like Martin has already covered

http://www.moneysavingexpert.com/savings/child-savings-tax-free

Yours


Calley

Claremac

Thanks, Calley. I think that it probably won't be worth doing it in terms of tax as it will probably just complicate matters! It was worth finding out thogh so thanks again.

D_e_n_i_s_e

do what your gran did - mattress!

Pennywise

Go and see an independent financial adviser - there are some investment products/accounts that "roll up" what would otherwise be interest so that when you cash them in, you get more money back, but the increase would be taxed as capital gains tax, for which you have an annual exemption for the first £9500, so you could avoid tax altogether. A good IFA will find low risk investments that virtually guarantee a similar return to current interest rates.