http://www.hmrc.gov.uk/taxback/childsavings.htm
Hooray, so I can give my little boy enough money to make him £5,035 pa in interest tax free. BUT....
http://www.moneysavingexpert.com/sav...vings-tax-free
So, anyone working round these rules and using your childrens tax allowance for interest above £100?
If I gifted my child a large sum of money, how will the they know it came from me and not a relative?
Thinking hats on please....
Children, like adults, can have a certain amount of income before they start paying tax. They are entitled to the same personal allowance as other people. So, for the tax year 2006-2007, they can claim back the tax on their savings income if their total taxable income is less than £5,035.
Hooray, so I can give my little boy enough money to make him £5,035 pa in interest tax free. BUT....
http://www.moneysavingexpert.com/sav...vings-tax-free
Children can earn £100 interest per year before you're taxed on it
However, don't assume you can dunk fortunes in your kid's name. If a child generates more than £100 interest in the course of the year from money specifically given by each parent, this income is taxed at that parents' tax rate.
In practical terms this means you could put up to £1,850 in the 5.7% top paying children's account, and it wouldn't be taxed, as that would generate around £105. Just to clarify, this doesn't mean £1,850 every year; it's the interest generated from all cash given in this and previous years.
Yet these rules only apply to parents, not grandparents, aunties, uncles or friends – they may all give your children as much as they like and, providing it's a genuine gift, it counts as the child's money without a £100 limit.
The only other tax implications of making cash gifts is the possible spectre of inheritance tax if the donor dies within seven years of making it. And a quick warning, for those bright sparks thinking, “if I gave my brother's kids £10,000 and he gave mine the same….”, well good thought, but no cigar. If the Inland Revenue spots you, you're in trouble.
However, don't assume you can dunk fortunes in your kid's name. If a child generates more than £100 interest in the course of the year from money specifically given by each parent, this income is taxed at that parents' tax rate.
In practical terms this means you could put up to £1,850 in the 5.7% top paying children's account, and it wouldn't be taxed, as that would generate around £105. Just to clarify, this doesn't mean £1,850 every year; it's the interest generated from all cash given in this and previous years.
Yet these rules only apply to parents, not grandparents, aunties, uncles or friends – they may all give your children as much as they like and, providing it's a genuine gift, it counts as the child's money without a £100 limit.
The only other tax implications of making cash gifts is the possible spectre of inheritance tax if the donor dies within seven years of making it. And a quick warning, for those bright sparks thinking, “if I gave my brother's kids £10,000 and he gave mine the same….”, well good thought, but no cigar. If the Inland Revenue spots you, you're in trouble.
So, anyone working round these rules and using your childrens tax allowance for interest above £100?
If I gifted my child a large sum of money, how will the they know it came from me and not a relative?
Thinking hats on please....
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