Get tax-free interest for your child
Children can earn £100 in interest, tax-free, every year on money given to them by each parent or step-parent. What’s more, grandparents and other adults who give money to children do not have to pay tax - even if the interest exceeds £100 a year.
To get your child’s interest paid tax-free, all you need to do is submit a form R85 to your bank or building society.
If the money going into your child's account was given by a parent, you need to be careful the interest earned on it is not more than £100 per year. Earn more than this and you will be taxed on the interest at your highest rate of tax. In other words, if you're a higher rate taxpayer, your child's savings could be taxed at a rate of 40%.
However, this rule applies to each parent so be clear who the money is coming from in each case. And with interest rates so low, your child would need to have saved a lot before you fall foul of it.
If your child receives regular sums from relatives other than parents it may be worth opening a separate savings account to keep it absolutely separate for tax purposes.
Retweet
Comments (
Facebook