Children savings accounts

The tax side

Who is who 
Saving or investing under your child’s name or under your own name can influence the way in which you build up funds. Running an account on your name means that the child will not have access to the funds until you allow him. If you want to put your child’s money in a cash ISA, you must open it under your name since they can only be opened by people over 18. On the other hand in common savings accounts you will be taxed for the income generated. 
If the account is under the child’s name, access is granted since they are seven. Children accounts are often more user friendly and specially designed for them to learn at an early age the importance of saving.
Taxes still exist 
Not all products for children are tax free. In fact there are important rules you should know when deciding which is the most appropriate product. When money is deposited as a parent’s gift, and earns more than ₤100 of interest a year, it is taxed as parent’s income.  Parents have a ₤200 limit. For money from other sources, children have a ₤4,745 income tax personal allowance. Furthermore in most of the cases inheritance tax also applies. If you die within seven years of passing the money to your children, the liability on inheritance tax can be up to 40 per cent of the saved amount. 
There are few tax-free options available in the market. The tax-free National Savings Bond offers a low rate at 4.45 per cent. It won’t be subject to the ₤100 rule, therefore it could earn higher interest than taxed savings accounts. You can deposit from ₤25 to ₤3,000 , and can get a bonus every five years. However, the bonds have a five year fixed rate subject to the effects of inflation.