Child accounts

[Bimblin]

I have CTFs for my two ds and have been paying in a monthly amount on top. I'd like however to set up accounts for them that they can't touch until they are at least 21. How do I go about this? I mean, a child account would be in their name so presumably they'd have access to it whenever, and if I put it in my own name it'll be taxed. Whats the best way to save them some money that they won't blow the minute they're i8? Thanks in advance.

You're talking about setting up a private trust fund. If you've not got a personal advisor at your bank, I would speak to them about getting one and finding out what they can offer you.

if you just set up a bank account in their name YOU would be taxed on any interest over £100 anyway.
Would 2nd trust fund advice, but depends on how much you are thinking of - what about using your isa allowance (in your names so safe and tax free).

I am not thinking of very much money, we put in #20/month each and then there is the odd gift. So probably not enough for a proper trust fund. So do most people just set them up a normal savings account?

I don't save for the ds's, they have their ctf's and my parents put something in each month for them.]
ds1 (5.9) has a bank account with excess money he has received at xmas/birthday, but it isn't much - £45 atm I think.
ds2 (2.5) has a running total in his money box because I keep using it when I need change - again less than £50.
I suppose it depends on your outlook, I don't plan to make savings FOR them, although I talk about money and savings etc and encourage ds1 to save some of his pocket money.

You are right £20pm probably isn't worthwhile for a trustfund - are you using your isa allowances elsewhere? That would give you the tax free option.
Otherwise some sort of monthly investment vehicle - bonds, investment fund etc?

I have little money to save myself but was working as a sole trader so my ISA allowance has been used for putting my tax money in. I do need somewhere to put cash for them as my MIL sporadically gives me a big cheque for them. If I just get them a savings account in their own names would they have full access to it? Just thinking that I'd have had that I'd have blown it all the minute I could.

I don't know if you could restrict access past 18. Probably best to ask a couple of banks.
Using your isa allowance for tax money isn't really a very good use - as presumably you take it out every 6 months to pay tax?
You would be better with the tax money in a high interest account and the dc's money in the isa - that way the isa builds up and all of the money has the tax free advantage, whereas with the tax money by taking it out to pay your tax each year you are effectively losing the allowance for the year.

I haven't yet filed a tax return but ultimately I have spread any and all excess cash in various savings accounts, filling up ISA allowances first, and will take out from the least profitable in order to pay the tax bill when I get it. I'm not too worried about using tax allowances as the actual income tax vs savings is bugger all. I've now got a limited company so it gets more complicated. So bearing that in mind should I open yet more savings accounts (for the dcs) or leave it in the CTFs? Thank you very much for your help by the way. I guess I should be asking my accountant

limited company should make it easier really - sompany pays tax, you (hopefully) take a £5k salary and the rest as dividends. No tax on dividends upto higher rate limit and 25% thereafter.
Anyway - opening in dc's names defeats the object of not letting them get their hands on it - no? Personally I would open an account in MY name, but view it as their money. Also there is the point that any interest over £100 is taxed as your anyway.
Or as I said earlier some sort of investment fund. You probably need to talk to an IFA rather than an accountant.

If they don't know the account exists, they can't get their hands on it, even if it's in their name.

I've got a child's account at the Nat West which is tax free, offers a good rate, is in DS's name, but with me as signatory. This will stay in place until he's 12 at which point we will create a sep. bank account for pocket money etc which he can use.

This is in addition to his CTF.

I'm saving money in each, but the savings account is for his education (should we need it) whereas the CTF will be his and his alone when it matures.

Agree with CS's point. There has to be a distiction between money you are saving for him (but which you wish to dictate) and money which is his for him to spend...

lol at RambleOn - very true

Ok they are both going to have the Halifax 10% account and not know about it for as long as possible, Thanks people

Bimblin - That's exactly what I've done. You will get letters with your name and the DCs name appearing in the window.

You'll have to get to the post in the morning before them

Please can anyone explain this comment?

"if you just set up a bank account in their name YOU would be taxed on any interest over £100 anyway"

I think (now I may be wrong here) that I have accounts in my name for my children but they are set up for non payment of tax (I am a tax payer)and so while my name is on the account it is treated as their money for tax purposes or am I (probably) wrong?

Thanks

If the account is in your name then you will be paying tax on the interest. Ihe account is in your childs name then you will only pay tax on interest of over £100 a year.
Unless of course it is an ISA or trust fund.

It can be in your name and child's name (has to have adult's name on it if under a certain age? ) It just can't be a 'joint' account, then you pay tax on any interest over £100. But would take a long time to pay interest if you're putting in £20 each month.

Halifax account is great - we've had it for our kids for a few years, we just chuck it into an isa at the end of each year (you have to end the account after 12 months, but can start a new one immediately)

It is in my name for my child (not a joint account). However I am sure that I am not paying interest on it and there is more then £100 interest - maybe I am wrong. Does anyone know the rule thisi s under so I can query with the bank? Thanks.

the account may be RECEIVING the interest without deduction of tax, but tax law is that if interest of over £100pa is generated on monies given to a child by their parent, then that interest is taxable on the parent - and the parent should be declaring it on their self-assessment.
If this is the case you aren't entitled to get it tax-free, but the bank won't know this - you have filled in the R(whatever) to get it free of tax, and they are implementing that.

see here for the HMRC information.

Is there anything to stop me taking all of the money out of my children's accounts and then give it to my parents for them to put back in. Thus meaning that we don't incur tax? Is this possible?

like lots of things re tax there is nothing to stop you as such, but the law is there and if you get caught...

with what you propose, if it was found it would probably be treated as part of a series of transactions to avoid tax.
There would also be the IHT implications - if any of you died within 7 years there would be IHT on the transfers.

I am willing to bet that there are alot of people with money they have given to children who have no idea about these rules, and are not declaring the tax.

Chances of this eing picked up, depends on the amounts involved I suppose.