Tax Breaks on Savings for Children
Saturday, July 4th, 2009Many parents and guardians opt to open savings accounts for the kids and grand kids early on. While most savings accounts work like an adult’s account, there are special tax breaks that children can enjoy.Most banks offer savings accounts specifically for children. Children will have what is known as a Personal Allowance of £6,035 for the tax year, which is income that they are allowed to receive, tax-free. Providing that their annual income, which includes interest, stays below this amount, they will be able to do the following:• Receive the interest without the tax being deducted• Claim any tax that they should not have paid Children are not able to claim savings interest tax-free if the money they are depositing goes above what the personal allowance allows. They can, however, reclaim some of the tax since they did not use the starting saving rate limit for all savings accounts. There are many savings products that are all tax-free that are out there only for children. One is the Child Trust Fund, which is for kids that were born after September 1, 2002. If the child in question is eligible for this plan, the parent or guardian setting it up will get a £250 voucher to start up the trust fund. After the fund is up, anyone at all is allowed to add to it, up to a maximum amount of £1,200 a year.
