Use your child - best child savings account

You cannot open an ISA for a child, I think 16 is the minimum age.

Thankyou - I'd forgotten that. This shows how 'funny' HM Taxes are, though. You cannot save into a relatively effective - and 'basic' type of account [a mini cash ISA] until you are 16, but you can 'fund' a contingency like retirement through a stakeholder pension as soon as you are born  :P

Yes, children will have access to something comparable to an ISA - the Child Trust Fund, into which about £1200 pa can be added, I believe. This becomes availabe at 18.

Personally, I think that the one 'good' policy the Tories came out with at the last election [knowing they would never have to implement it!] was to propose scrapping tax on all savings accounts. Life would be so much simpler for savers.

ISAs [off-topic, still, I know] don't pay the best rates of interest, as we know, even though the paperwork for administering must be minimal. If there was no tax on savings accounts these distortions would disappear.

Anyway, a question! Money paid as 'pocket money'? How much could a parent get away with 'paying' their child for chores and still not fall foul of the £100 rule? Remember that Martin's £1900 or so isn't repeatable, since it would raise £100 each year. Once the child's savings exceeded £2000, their parents would become liable - even for money put in their child's name some years earlier. My 'theory' is that if you employ your child they can offset taxable income against their own annual allowance. The only issues I can see here are:

1) Child does not really perform work - so not a geniune payment, and would have to be shown otherwise
2) Law denies child the right to work [but,  perversely not a tax allowance] until a certain age, and with restrictions where some work is allowed.

We have recently opened a A+L first save account (mentioned in Martin's article) for our son. He received several cheques as gifts for his Christening but when we tried to pay them in we were told we could only pay in five per day. Has anyone else come across this? Could anyone explain why? The casheir at the branch we used could not shed any light on this, and refused to hold onto the other cheques to pay in the next day.

Also, what constitutes proof to the taxman when showing that monetry gifts paid into the account are from relatives???

What about the childdren's alowance. If this is not used except to be put into an account in the child's name is it seen as money from the parent and therefore subject to the £100 rule for interest

Child benefit is for the parent for care of child.
Parent may instruct them to pay directly into their childs savings account (as I have done). My view is that as recipient I am is simply diverting their funds to the child and so in my view any interest earned on this would be treated as counting towards the £100 limit. I'm sure that is strictly how the Inland Revenue would see it.

This rule must be difficult for the Revenue to police and would be interested to hear if anyone has been caught out. Their review of child accounts would need to prioritise checks and I suspect would only pick up those with interest significantly more than £100.

So long as you don't go mad with this then I doubt there would be repercussions..... no guarantees though !

You can invest from £25 to £1,000 in each Issue of Children's Bonus Bonds, in units of £25. Each time we bring out a new Issue, you can invest up to its maximum limit.

Children's Bonus Bonds are owned by the child. But until they reach 16 the Bond is 'controlled' by their parent or guardian regardless of who bought it.

This means only the parent or guardian can cash in the Bond, but the money still belongs to the child.

Normally, if a parent gives their child money to invest, the parent is liable to tax on the interest if it comes to over £100 in any tax year, even if the child isn't a taxpayer. But with Children's Bonus Bonds the interest and bonuses are all completely free of UK Income Tax. Even if the child starts work and becomes a taxpayer before cashing in their Bonds, they still won't have to pay tax on the interest.

To qualify for bonuses, Bonds have to be held until a five-year anniversary or until the child is 21. However, if the bondholder needs access to the money earlier, all or part of the Bond can be cashed in without notice. No interest is earned if a Bond is cashed in within a year of purchase.

Current interest Rate 4.70% AER   Tax-free

Says it all. The government sternly admonishes parental giving by having a a 'ridiculous' and artibitrary limit - like £100 - but then 'blatantly' advertises through National Stavings a gimmicky way of avoiding tax altogether! So it's not to avoid a loss of revenue, this rule, is it? It's more to do with preventing fair competition for National Savings.

[JMO]  >:(