interest on youth account tax

[wendyl]

I have small savings accounts for my granddaughters with Barclays (less than �500) Only occasional small amounts are added and previously no tax has been deducted from the interest. Recently one of them had 20% deduction for tax of 17 year old full time student. Is this because of her age? and if so is there a better, accessible place to save this money and is this tax unavoidable please?

[dzug]

You can avoid paying the tax by filling in a form (R85 from memory) and giving it to the bank. You can get the form from the bank.

The deduction is probably due to the account becoming an 'adult' one. If you signed one of these forms when you opened the account, the responsibility has now become your granddaughter's.

[wendyl]

Thanks - thats what I thought but are you saying that tax will not be deducted if she herself signs a new form? She was not made the signatory when she was ?11 as suggested by the bank for family reasons so she has not had access
thanks dzug

[dzug]

I think she has to sign the new form herself - but check with the bank.

All would not be lost if you didn't want her to know about the account just yet. She would be able to reclaim the tax (from the tax office) for up to (I think) 6 years.

[kempie]

http://www.hmrc.gov.uk/taxback/intro.htm

[WendyS]

Also, to avoid any problems with tax on interest in the future, now that your granddaughter has reached the age of 16 she can open a Cash ISA with the sum involved, if you are prepared to transfer the money over to her and this would be tax free.

[wendyl]

thanks for the suggestion - the bank is being quite helpful and we are still deciding