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What is the tax position on interest on childrens savings accounts which have been funded by a grandparent?

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What is the tax position on interest on childrens savings accounts which have been funded by a grandparent?

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  1. Exactly the same as if it was funded by the child.


  2. All wrong. I write not only as an ex-professional, but a very new Grandmother.

    The child gets the same tax allowance as anyone else, shortly becoming £6035 per annum. As a Grandparent, you can fund as much as you like, no tax due until child has interest over £6035. The £100 interest limit applies only to funding by parents, thus stopping parents avoiding tax in this way.

    You may have to watch your inheritance tax position. If you only live less than seven years after the gift, the amount may still be taken onto account when your estate is valued. You can give a lump sum of £3000 annually without this happening, spread in one or more directions, plus unlimited sums of £250 to different people.

    I have been looking at different investments for our little Baba, and interest rates are very low. With the odd exception, the best seems to be about 5%, so you would have to make a massive gift for child to be liable for tax.

    Form R85 should be completed when opening account, so that no tax deducted, and parents do not have the hassle of reclaiming tax.

  3. £100 per annum tax free interest then tax paid at basic rate. grandparents can also open pension plans for grandkids and receive basic rate tax relief on contributions up to £3600

  4. So long as you open a child account in the Grandchild's name there will be no tax. You need the child's birth certificate to open the account.

  5. you still have to pay tax no matter who it is or everyone will be opening accounts on behalf of children to save paying tax.

  6. The account will be zero rated up to a maximum of £100.00 INTEREST paid per year.

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