The best accounts for your child's Christmas moneyEarn the best rate on your children's savings
24 December 2011
If your son or daughter receives money from grandparents, aunts and uncles this year, encourage them to save with a Best Rate children's savings account.
Children often receive cash for Christmas. While it may be tempting to allow your kids to spend the money in the new year sales, you may want to encourage them to put some aside. If you do, make sure your child is getting the best return on their money by choosing a top-paying children's savings account from the table below.
Compared with a Junior Isa or child trust fund (CTF), which lock up your child's money until they turn 18, children's savings accounts offer instant or near-instant access when the cash is needed.
Does my child have to pay tax on their interest?
Most adults have 20% basic rate tax deducted from the interest earned on their savings. However, it is unusual for children to pay tax on interest.
Children, like most adults, have a tax-free personal allowance (£7,475 for the tax year 2011-12). So long as their annual income, including interest, is below £7,475, they won't have to pay tax on interest.
- For a child to receive interest tax-free, the parent or guardian needs to fill in a Form R85 for each account.
- To claim back any tax already paid by the child, the parent or guardian can make a claim to HM Revenue & Customs (HMRC) using Form R40.
Best Rate children's savings accounts
|Provider||AER £10+ AER help||Free gift||Max age||Access Access help||Customer score Customer score help|
|2.75%||Yes||17 years old||51%|
|2.00%||No||15 years old||56%|
|2.00%||No||15 years old||53%|
|2.00%||Yes||17 years old||n/a|
|1.75%||Yes||17 years old||56%|
|1.60%||Yes||17 years old||63%|
AER is annual equivalent rate and shows how much interest you'll receive in one year.
Which? score based on customer satisfaction and likelihood of recommending company to friend/family member.
- Junior Isa review- compare the new long-term accounts to find the best one for you
- Tax and your children - how kids are taxed on their savings, investments and other earnings
- Child Trust Funds explained - a quick guide to CTFs and how to switch