Sebastian van Mook DipFA CeMAP
Independant Financial Adviser
17 Saint Anne's Road

01743 356661

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Authorised and regulated by the Financial Conduct Authority No.230342 Registered in England 4961992

Child Savings

If you have children or grandchildren, you may want to open a savings account for them to encourage them to save from an early age or to provide them with funds for further education, driving lessons, weddings etc.

Most adult savings accounts will have 20 per cent tax deducted from the interest before it's paid.

Many banks and building societies also offer savings accounts just for children and, as with adults aged under 65, children have a personal allowance of £10,000 (tax year 2014-15).

This means as long as their annual income (including interest) is below this amount, they'll be able to:

  • Receive interest without having the tax deducted (parents or guardians fill in a Form R85 for each account)
  • Claim back any tax they shouldn't have paid (parents or guardians make a separate claim to HM Revenue & Customs (HMRC) using Form R40

    A child cannot receive savings interest tax-free if their income is above the personal allowance but they are able to reclaim some tax because they haven't used the starting rate of 10% reserved for savings only. This is up to £2,790 above the personal allowance.

    You can give a child or invest on their behalf as much money as you like but if you're a parent or step-parent and the money you give your child earns more than £100 interest a year, this interest will be taxed as if it were your own.

    The £100 limit only applies to parents and step-parents. Grandparents and other adults who give money to children are not liable to pay the tax if the interest exceeds £100 a year.

    Junior ISA's

    There are two types of Junior ISA:

  • A cash Junior ISA
  • A stocks and shares Junior ISA
  • Your child can have one or both types of Junior ISA at any one time. There is no tax to pay on the income or any gains (profits) a Junior ISA makes.

    The money in the account belongs to your child and can't be taken out until they are 18. There are exceptions to this, for example if your child becomes terminally ill.

    Anyone can put money into the account. The total amount that can be paid into a Junior ISA in each tax year is £3,840 (2014-2015). A tax year runs from 6th April one year to 5th April the following year.

    If your child has two junior ISAs you can transfer money between them. But you can't transfer money between a Junior ISA and an adult ISA or between a Junior ISA and a Child Trust Fund (CTF) account.

    If your child moves abroad, you can still add money to their Junior ISA.

    If your child is under 16, someone with parental responsibility (for example a parent or step-parent) must open the Junior ISA for them.

    Children aged 16 to 18 can open their own Junior ISA. But someone with parental responsibility could still open the account for them.

    A range of Banks, Building Societies, Credit Unions, Friendly Societies and Stock Brokers offer Junior ISAs. You can find out more information about their terms and conditions and how they operate the accounts directly from them. Try to look at a number of Juniors ISAs from different providers before you decide what's best for you and your child.

    The person who opens the Junior ISA is responsible for managing the account until the child is 16. You can change this to someone else with parental responsibility at any time.

    You can also change providers or account type at any time.

    When your child is 16 they can manage their own account if they want to.

    When your child is 18 they can choose to take the money out of the Junior ISA or invest it in a different type of account. Otherwise the Junior ISA will automatically become an adult ISA.

    For advice and information on choosing the most suitable Junior ISA please contact us.