Tax and childrens savings

dippy3103

Just a quick query. My 18 month old son has just over £800 in a childrens savings account, earning a failry respectable amount in interest. It has been saved by my partner and I and both sets of Grandparents. I am sure i read somewhere that once he starts to earn over a certain amount each year in interest it becomes my tax liabilty? Does anybody know how much?
My partners parents are on a pension and pay in £10 a month for him (this is lot of money to them). They live 100 miles away and pay it into their local branch of his building society. Would it make more sense to open a seprate joint account for them with him? They are elderly and do not have access to direct debit etc.

Are there any long term childrens investments (not including his CTF) that we can pay money into that would not attract tax on the interest?

martinman3

The HMRC £100 rule is mentioned regularly on the forum, here is a link to a recent thread. http://forums.moneysavingexpert.com/showthread.html?p=10093511

The £100 limit before needing to declare the interest is per parent, assuming an interest rate of 5.5% it would mean approx £1800 contributed by one parent or £3600 contributed by both, depending on whether the deposits were transferred from an account in single name or a joint account in both parents' names.

It would make sense for the grandparents to open their own account if the total in the account that you already have will exceed the limits stated. It would be opened on the same trustee basis that the existing account has. Be aware that some organisations don't allow more than one child's account for the same child and some do.

You don't mention it but I assume that you have filled in a R85 for the account so that interest is paid gross.

debbie42

martinman3 wrote: »

It would make sense for the grandparents to open their own account if the total in the account that you already have will exceed the limits stated.

I just make sure I keep a record of the payments into my childrens' accounts that are not parental contirbutions. All the significant ones to date were not cash, so have been easy to document and maintain a paper trail. This should satisfy tax requirements without the need for a separate account.

CLAPTON

if your parents are elderly and are comfortable with the current set up, why not open a new a/c for your contributions and leave the old one just for the grandparents or any other non parental money he gets given.. (make sure you have set up a R85 for the a/cs though)

dippy3103

Thanks for some good advice. I assume the R85 the form that we have filled in as he is not a UK tax payer?

Looks like we need to do something sooner rather than later as we really want to build him a little nest egg for when he is older!

Maybe a seprate account with his Grandparents- i think they would enjoy seeing what they are putting away for him grow!