There may be a temptation to invest your savings in accounts held in the name of a child, with you as trustee, after all children too can have income up to £8,105 each year tax-free. However, you could be caught out by this.
Currently there is a maximum of £100 of gross interest per year that a child can receive from monies invested by each parent into an investment in the name of the child. Should the income exceed £100 then the whole amount will be taxed on the parent.
Exceptions to this includes the tax-free Child Trust Fund, the government's cash handout scheme for children born between 1 September 2002 and 2 January 2011.
Also, the tax-free Junior ISA is available to those who did not qualify for the Child Trust Fund, although not a replacement, there are similarities in that investments can be made in cash/stocks & shares, switched between providers and no withdrawals can be made before the child reaches 18 years of age. There is now a limit of £3,600 a year which can be added to one of these account by parents (or by other family and friends). The government does not make a direct contribution to a Junior ISA as it did with the Child Trust Fund.
The anti-avoidance rules only relate to monies invested by a parent.....not a grandparent !
For those seeking a long term investment for a child, a parent can pay pension contributions of up to £3,600 a year on behalf of a child under 18. As contributions are paid after deduction of basic rate tax, even though the child may be a non-taxpayer, the cost would be £2,880 to the parent and £720 coming from the government.
All enquires to firstname.lastname@example.org