Told I can’t use this premium bonds money for our house deposit as it’s illegal?

[kiav]

We have two premium bonds accounts. One is in my name and one is in DD’s name. We have 50k in mine and 30k in DD’s.

we are now in a position to buy a home. We will need the 50k for a deposit and we also need the 30k for things like stamp duty, new sofa, to do a small bit of work that needs doing in the downstairs etc.

I have been told by a friend it’s illegal to use Dd’s 30k for this? This is money we have saved from our income but now our circumstances have changed we need it. Surely premium bonds should tell you this before you invest??

You can't use a child's account at a bank to get better interest rate for yourself

So a family of 4 with 2 adults and 2 kids could have each adult stick £20k each in a tax free isa a year, and then 4 x £50k accounts for premium bonds, with no tax paid? Blimey. Just need the £240k and I'm off to the races

No, it's not like a JISA. Parents retain control of the PB for an under-16 and can withdraw money at any time. It takes seconds to withdraw it again online.

Morally you might not agree, but as per the way PB works and how the government have chosen to implement them, you are free to withdraw children's PB to your own account no questions asked and have any winnings paid to your own bank account.

OK I think there's some confusion here. There are two things:

(1) legally can OP use the money saved for her child to put towards stamp duty, furniture etc? She is a trustee for the child and does have fiduciary duties as a trustee. She doesn't have unfettered rights to do anything she wants with the money and it should be managed in the interests of the child - if she spunked it up the wall on cocaine and her kid found out later there might be a case against her. Using it for stamp duty for the family home? No issues whatsoever, clearly in the child's interests.
(2) is it an issue that it's premium bonds? Normally no, but the problem here is the solicitor could be concerned that this is money laundering because the OP has maxed out her 50k limit and then put 30k in her child. If the solicitor becomes aware, it would be completely understandable that they would be concerned. I'm sure that this isn't why the numbers worked out this way and it's just bad luck for OP so if the OP can evidence that the intention always was that this money was for her child (and not a tax dodge) then it's not an issue. But who keeps records like that (unless they are actually tax dodging!).

Is (2) really an issue? The answer is maybe - it depends what questions the solicitor decides to ask.

This is correct. The fact that parents can manage the funds for the child doees not mean that they can simply help themselves to it.

Of course the child is very unlikely to ever discover that this happened and it's fairly unlikely that any other body/person will challenge it so in reality the OP can probably do as she wishes.

I think you have missed the point.

If you're saying an adult can't open an account IN THEIR NAME meant for someone under 18, well, that obvious.

To be honest, no one will know or care, apart from perhaps your "friend" who it's best not to discuss your private finances with again.

You were trying to get some extra tax-free interest. You consider the money yours, and you are going to spend it like it's yours, but literally no one will find out or care if it's one renovations. It will indirectly benefit her, but you would have spent it like that anyway.

You can absolutely cash in the premium bonds until she's 16, no questions asked.

There's no interest paid on PB.

You either win or you don't.

Most wins are tiny- around £25 a month but rarely every month.

Holders of PB can have the winnings either put back into PBs or into a named account.

Of course you can - just stop telling people or they may judge.

My mum spent money she'd put in my savings for my shoes - because she was a young single mum and I needed them.

As others have said, it isn’t tax evasion at all. Premium bonds are gambling. You may get nothing. It’s a prize draw. It’s not the same as a savings account where you get interest and to get that the money is taxed.

An individual is entitled to hold 50k. Her DD is an individual, because she’s under 16, the money is in the adults control.

There is no problem with this at all. Thousands of families use their child’s legal allowance to hold premium bonds as well as their own. It’s how it works!

this is the weirdest thread!

TBH OP and I know you didn't ask this, for investment purposes you'd be better off opening a junior ISA for your DD.

That way however it can't be touched or withdrawn by you (I'm pretty sure) but the interest long term may exceed wins on PBs.

But there would be tax due on the £30k if it wasn't parked in the daughter's name, because the OP has maxed out their own PB allowance. This is the tax that's been avoided.

Yeah, they absolutely can help themselves to it.

That's what managing the account means. Legally, there is absolutely nothing to stop OP taking the money out of the PB and using it. Nothing at all.

This is exactly why I don't understand anyone putting that much money in premium bonds. Imagine the (tax free) interest you could have earned on that in a cash/stocks and shares ISA. Especially for the kid's money....

Its not literally interest, but it is tax free. Either way, it was in the child's name to maximise a tax advantage.

100% this. Some of these responses are crazy.

There have been other threads on here where parents have put PBs in children’s names and there’s been a big discussion about what to do if one wins big, and the advice is ALWAYS along the lines of - they’re under 16, it REMAINS YOUR MONEY - so the fairest thing is to share any big win between them and not let on ‘whose’ bond it came from.

No because they are buying a HOME for their daughter to live in!

Premium Bonds don't pay interest. They are gambling and all winnings from any form of gambling are 100% tax free.

Oh dear.
PBs don't gain in value. It's like the lottery- you either win or you don't. If you don't your savings in a PB diminish with inflation.

There is no interest to pay on them. Or on the winnings.

And if the OP had wanted to save another way she could save £20Kpa in her own name in an ISA and not pay tax on the interest of that account.

Entirely legally. I'm sure HMRC will miss the £25 or whatever the kid might have gained.

I don’t even see this logic really. I don’t put money in PBS to avoid tax - that wouldn’t be much anyway and you’d get more in interest, it wouldn’t even factor in the decision making. I like PBs because you might win big and the tax/interest on what I’d put in isn’t enough to sway me from taking a chance and having the fun of seeing if I’ve won.

No, it's not like a child's ISA. You can cash in your child's premium bonds at any time.

What I am lacking is a link to any source which says for what purposes you can spend your child's money. Most people say you can, but I'd love to see something from a solicitor or even an article.

Anyone have one?

Yes there is. The parent is acting as a fiduciary. The legal title to the money is the child's. They cannot (legally) act as if the parent owned the money. In practice there may be nothing to stop them from taking the money out and using it themselves but that is because parents are generally trusted to manage the child's money for the child's best interests.

Let's see the source of you saying that parents cannot legally withdraw money from a child's PB account to spend as they wish.

I'll wait.