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  • FIRST POST
    • henryandmay
    • By henryandmay 7th Aug 18, 11:24 AM
    • 50Posts
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    henryandmay
    Interest on child savings
    • #1
    • 7th Aug 18, 11:24 AM
    Interest on child savings 7th Aug 18 at 11:24 AM
    I am doing some research for my sister who is looking to start saving for her child:

    From what I have read, you can only earn £100 interest on child’s savings per tax year before you pay tax, is this correct?

    Can someone explain in simple terms how tax works on children’s accounts, I'm getting confused and also, would you still pay tax if money is held in an JISA which is assumed would be tax free.
    Many thanks
    H.
Page 1
    • eskbanker
    • By eskbanker 7th Aug 18, 11:43 AM
    • 8,772 Posts
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    eskbanker
    • #2
    • 7th Aug 18, 11:43 AM
    • #2
    • 7th Aug 18, 11:43 AM
    See https://www.moneysavingexpert.com/savings/child-savings-tax-free/#taxing - the £100 rule only relates to money gifted to the child by each parent, and JISAs are indeed tax-free.
    • xylophone
    • By xylophone 7th Aug 18, 11:57 AM
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    xylophone
    • #3
    • 7th Aug 18, 11:57 AM
    • #3
    • 7th Aug 18, 11:57 AM
    If she intends to make gifts to the child of up to the JISA maximum each year and intends the money to be available at age 18 then the JISA seems appropriate.

    https://www.gov.uk/junior-individual-savings-accounts

    http://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

    https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-junior-isa

    http://monevator.com/using-vanguard-lifestrategy-funds-life/

    https://moneytothemasses.com/quick-savings/parents/best-junior-stocks-and-shares-isa
    • henryandmay
    • By henryandmay 7th Aug 18, 12:15 PM
    • 50 Posts
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    henryandmay
    • #4
    • 7th Aug 18, 12:15 PM
    • #4
    • 7th Aug 18, 12:15 PM
    Thanks.
    so you can gift the child £4260 per tax year into an jisa which she will not pay any tax on the interest even if the interest earned is more than £100?
    What happens in Y 2, 3 and so on when the balance would accumulate and earn a lot more interest than £100?
    • eskbanker
    • By eskbanker 7th Aug 18, 12:34 PM
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    eskbanker
    • #5
    • 7th Aug 18, 12:34 PM
    • #5
    • 7th Aug 18, 12:34 PM
    so you can gift the child £4260 per tax year into an jisa which she will not pay any tax on the interest even if the interest earned is more than £100?
    Originally posted by henryandmay
    Correct.

    What happens in Y 2, 3 and so on when the balance would accumulate and earn a lot more interest than £100?
    Originally posted by henryandmay
    Same again - all the interest earned from the JISA is tax-free for as long as the account is open and doesn't count towards the £100.

    There is also the option of using an investment JISA rather than a cash one, which is likely to give better returns over the long term, so the younger the child the more appropriate it's likely to be....
    • henryandmay
    • By henryandmay 7th Aug 18, 12:42 PM
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    henryandmay
    • #6
    • 7th Aug 18, 12:42 PM
    • #6
    • 7th Aug 18, 12:42 PM
    So when would the £100 rule apply?
    • xylophone
    • By xylophone 7th Aug 18, 12:55 PM
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    xylophone
    • #7
    • 7th Aug 18, 12:55 PM
    • #7
    • 7th Aug 18, 12:55 PM
    So when would the £100 rule apply?



    Where gifts from a parent (outside tax privileged accounts like JISA) produce more than £100 gross income a year, the whole of the income from the gifts is taxed as the parent's income. A child cannot claim back any tax on that income.

    The £100 rule applies to young people until they reach eighteen or marry (whichever comes first).

    The £100 rule applies separately to each parent. It does not apply to gifts given by grandparents, other relatives or friends.
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