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saving for a grandchild

I want to open up a savings account for a grandchild to be able to any small amounts in per month as and when I can afford it. What is the best way to do this? I have a copy of his birth certificate.


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There are 2 ways to do it tax efficiently. The first applies for a child born in or after 2002 and that is to contribute to the Child Trust Fund that the parents should set up with the government voucher. The other is to set up a 'blind' or 'simple' trust for the child. That would be a savings account in your name re the childs name. The tax exemption certificate would need to be completed by a parent. Do not give the money to the parents to invest. Any money that they give to their child which eventually mounts up to £100 interest in a year would be deemed to be the parents' income for tax purposes. It would not be subject to the child's own personal allowance. Both these options require the proceeds to be handed over to the child at age 18, but I have seen cases where it happened much later. If you wish to retain control until later (25 maybe) then you would need a different form of trust which is unlikely to be economic for small sums. Mike

Thank you Mike. Is there anyway I can do this disceretely without either parent having to sign the tax exemption certificate? I do not live near them.

hi elsiemary, Mike didn't mention the easiest way to save discretely for a grandchild: open an account in your name. Do you use you cash ISA allowance each year? That's £5100 this year. If not, then open one and say to yourself, that's for little James. If you do use a cash ISA but don't use the full amount, then add the savings for little James to your account and keep a little list somewhere of how much 'belongs' to you and how much 'belongs' to the child. This way the savings are tax free, his parents never hear about them and it's up to you if you hand them over at 16, 18, when he finishes uni, 25, when he gets married or anything else you think is suitable! manzanilla

Elsiemary The tax form should be signed by one of the parents because they are the child's legal guardians. But it only needs to be one parent and it only needs to be once and then it will last until the child is 16. Do you not want the parents to know about it or is it just the infrequent meetings? If it is the latter, then you now only need to get it signed and submitted before 6 April next year. It would be better if you could submit it before the annual interest date, but if you can't the bank can refund any tax deducted if the form is submitted before 6 April. If you miss that deadline, the parents would have to reclaim the tax deducted from HMRC. Mike