savings accounts . However if you are opening savings accounts for children under the age of seven the account will have to be in the parents name with the childs initials attached. Once your child is over the age of seven he or she may hold an account in his or her own name.
Savings accounts for children often offer highly attractive rates of interest and most children will be able to benefit from interest paid gross because their income will be below the level of the personal tax allowance. Ensure this happens by filling in HMRC Form R85 when you open the account
Parents should beware however. If the interest your child earns is more than £100 a year then it will be treated as parental income and taxed accordingly. The only way round this is to demonstrate that the savings that have accrued have not been contributed by you - interest on funds that have been given by friends and relatives does not count towards the £100 limit.
An alternative option to savings accounts for children under the age of 16 is National Savings & Investments Childrens Bonus Bonds. These bonds require you to invest for a five year period during which interest accrues tax-free and provided the bond has been held for the full five years bonus interest is added as well.
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