Children’s income
Friday October 2016
Children’s income is theirs in their own right, no matter how young they are. They are also entitled to the full personal allowance. However for a child under the age of 18 and unmarried, this does not apply to income that comes directly or indirectly from a parent. Where it has come from the parent it is treated as the parent’s own income with the following exceptions:
- Each parent can give each child sums of money from the total of which the child receives no more than £100 gross income per annum eg interest on bank or building society deposits. If the income exceeds the limit, the whole amount and not just the excess over £100 will be taxed on the parent.
- The National Savings ‘children’s bonds’ for under 16 year olds can be given in addition because the return on such bonds is tax exempt.
- A parent may pay personal pension contributions of up to £3,600 a year on behalf of a child under the age of 18.
- Parents may contribute towards a Child Trust Fund Account for their children.
A child includes a stepchild, an illegitimate child and an adopted child.
For tax purposes income that arises to the child that has come from the parent is treated as a settlement and is taxable on the parent under ITTOIA 2005 s629.
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