Tax
Until a child reaches 18, income from investments given to the child by a parent is taxed as the parent’s income, apart from the first £100. If you invest more than around £2,000 for a child at today’s interest rates you may be lumbering yourself with an added tax burden because the interest paid will be more than £100. Once the interest you earn has breached this limit, you pay tax on the whole investment. These rules are designed to stop parents using their children to avoid inheritance tax rules.
So it could be important to make the most of tax-free investments such as National Savings Children’s Bonus Bonds or friendly society baby bonds. And remember that each parent can give their child investments. So a child could earn £200 in interest a year from the two investments and avoid giving their parents a tax bill. Alternatively a grandparent or other family member could set up the account. This way your child gets the same personal tax allowance you would.
 |
||||
|
|
|
|
|
|
TIP: If a child is a non-taxpayer, register them as such to get interest paid gross from savings accounts from banks and building societies. Get form R85 from a bank or building society to do this.
|
|
|
|
|
||||
