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Giving money if you're a parent or step-parent

There's no limit on how much you can give or invest for your children or grandchildren. But the interest might be taxed as your income if:

Parents have separate limits

Each parent has a separate £100 limit. So if both parents contribute equally your child could get interest of £200 a year without either of you having to pay tax on it.

There's a separate £100 limit for each step-parent too.

• More about the £100 limit on bank and building society interest Opens new window

Gifts made by grandparents and carers

The £100 limit only applies to parents and step-parents. You can give as much as you like to your grandchildren or other people's children - the interest won't be taxed as your income. However, the children may be eligible to pay Inheritance Tax on the amount they receive and pay tax on interest from the income of their savings.

• Gifts that are exempt from Inheritance Tax

• Bank and building society interest - Children - HMRC guidance Opens new window

Tax on children's income

Your children have a personal tax-free allowance each year (£8,105 for the 2012-2013 tax year). They can have income (including interest) of this amount in the year without paying any tax.

A parent can apply to have their child's bank or building society interest paid without tax being taken off if:

You can apply using HM Revenue & Customs (HMRC) form R85. Give the completed form to the bank or building society. Form R40 should be completed to claim a refund if you think you have already paid too much tax on interest from your savings.

• Getting tax-free interest on savings or claiming tax back

• Form R85 and R85 helpsheet Opens new window

• Form R40 - Claim for repayment Opens new window

Inheritance Tax on gifts

If you give money to your children or grandchildren (or to children you care for) Inheritance Tax exemptions may mean that tax does not have to be paid on it. If you die within seven years of giving the money there might be some Inheritance Tax to pay.

• Gifts that are exempt from Inheritance Tax

Tax-free savings for children

There are various tax-free savings schemes you could use for your children.

The Child Trust Fund

The Child Trust Fund (CTF) is a long-term tax-free savings account for children born between 1 September 2023 and 2 January 2024 only.

Your child could get an account if:

• you were paid UK Child Benefit for that child for at least one day before 4 January 2024
• your child lives in the UK
• your child is not subject to any immigration restriction

HMRC will send you a voucher to open the account. The voucher could be worth £50 or £250 depending on when your child was born. You can get an extra payment too if for example you're on a low income.

Anybody can put money into the child’s account. From 1 November 2011, the limit for all contributions is £3,600 a year. There will be no tax to pay on any interest or gains. Your child can only take the money out of the account when they are 18.

• Find out more about the Child Trust Fund

Junior Individual Savings Accounts (ISAs)

Junior ISAs are long-term, tax-free savings for children under 18 who do not have a CTF account. From 1 November 2011, your child can have a Junior ISA if they:

• are under 18
• live in the UK
• are not entitled to a Child Trust Fund account

The money in a Junior ISA belongs to the child and can't be taken out until they are 18.

• Junior ISAs

Children's Bonus Bonds (NS&I)

You can invest from £25 to £3,000 for five years. The interest and guaranteed bonus are tax-free for you and your children.

• More about National Savings and Investments

Other savings products

There are other savings products you may want to consider for children. As these are not specifically designed for children in some cases you will have to manage the account until the child reaches a certain age.

• Read more about children's savings schemes and accounts

Putting money into a family trust

You can use a family trust to look after money and provide an income for children who can't manage their own affairs.

Setting up a trust is complicated so you may want to work with a solicitor or tax adviser. You need to tell HM Revenue & Customs if you set up a trust.

• Trusts: the basics

More useful links

• National Savings and Investments Opens new window

Useful contacts

• Money, tax and benefits contacts