Tax on children’s savings accounts explained
Opening a savings account for your children is a great idea, and according to the money advice service, by the time your child is 18 they could have enough for driving lessons or a deposit for their first flat by putting away just £5 per month.
Do children get taxed?
People often wonder whether or not children have to pay tax on their savings, and the answer is yes, but only if their annual income is over £10,600, which for most children it certainly isn’t.
There will also be tax to pay if more than £100 in interest per tax year is paid into the account by a parent.
Reclaiming tax
It is important to note that banks and building societies will automatically deduct tax from interest on these accounts at a rate of 20%. However, you can let them know the account is in fact for your child by filling out this form, and they will stop te deductions and reclaim your money.
Other accounts
There is also the option of investing in a tax-free account such as a Junior Isa or Child Trust Fund, both of which have no tax deducted from the interest.
CLICK HERE to read any additional information over on the Government’s website.
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