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Tax Insider Tip: Children’s Income

27th Jul 2016
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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.

101 Ultimate Tax Strategies RevealedThis is a sample tip taken from our 136 page guide:

101 Ultimate Tax Strategies Revealed

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