children's savings - can anyone make sense of this please?!

[surprisenumber3]

Just had statement for DS1's Halifax Children's regular savers account. Was supposed to be fixed at 10% interest for a year.

Have put £100 in most months, £50 a couple of months.

Anyway, the statement says he has accumulated £12.93 over a year and has paid 20% tax on that, £2.59.

I have called them and they say I have to register to not pay tax as he is a child - it is a children's account FGS! They said to get the interest back I would have to call Inland Revenue??!!

Only £2.59 but that's not the point but still, surely with £1000 in the account there should be more interest than £12.93.

Can anyone help me understand this please? Man on the phone couldn't!!

Message withdrawn

I had this a few year ago with Nationwide childrens accounts. They were supposed to have given me a form to complete with regards to tax not being deducted but they forgot to do so and like you, I assumed that as a childrens savings account, it would automatically not be deducted. Ask them for the form to fill in and return to them to ensure no tax next year but I'm not sure you'll get back what you paid automatically without going to the IR which may not be worth it for £2.59.

Like you, I assumed that a child's account would be tax-free; we save DS's child benefit every month and originally did this in an Abbey savings account. However, the bank warned us we would be taxed on it so we opened an ISA in my name instead to save the child benefit for him. He has kept his Abbey account - his granddad pays in £50 a month and apparently that is tax-free

Apparently, he has to pay tax if we are paying money into his account but not if his grandfather is

It was 10% when we opened one of these accounts back in August. I also remember signing forms so that it was tax free.

To get the 10% interest however we had to pay in a fixed amount by direct debit. Any extra we want to pay in goes into the linked savings account with not so good a rate of interest.

We pay the maximum £100 per month in. You are allowed £100 per month per child per parent tax free. We use it as an extra tax free method of saving towards school things.

I think you were given incorrect information slayerette. There are checks in place to stop parents avoiding tax but parents can pay in, just not more than a certain amount.

just to give you a guide on the interest, we put in £60 per month to one of these, and the annual interest as at February was about £114. It looks as though they haven't given you the 10%.

They cocked ours up twice, and the terms are very strict - if one of your payments went in on the wrong day, it might mean that a month went by with no payment, in which case they withdraw the rate and treat it as a nornmal child's saving account.

As for the tax free element did you sign a form that stated that the person holding the account would be a non tax payer as I think that needs to be signed so that no tax is payable on the interest.