Income earned from gifts from parents is exempt if less than £100 per annum. Otherwise the income is taxable as that of the parents.
Consider gifting sufficient capital to generate this amount in income or utilise tax-exempt savings products to build up savings for the children.
This limit can be overcome by putting money into a Junior ISA or by investing in Children’s Bonds, which generate a tax-free return.
Gifts can be made by grandparents to grandchildren without restriction.
Example:
John is a higher rate taxpayer (paying tax at 40%) and gifts each of his children £2,000, which is placed in a children’s account for them and earns £80 interest per annum.
As this is less than £100 it is not taxed as John’s income. John therefore saves £32 per annum in tax which he would have otherwise paid on the interest income had the money been placed in an account in his own name.
This is a sample tip taken from our 136 page guide:
101 Ultimate Tax Strategies Revealed
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