Children
Children’s savings tax: when a parent pays tax on the child’s interest
Enter what one parent has given the child, the rate on the account and that parent’s income. The tool tests the £100 limit and, when it is passed, works out the tax on the parent for this year and next.
The £100 rule on money a parent gives a child
Taxed as the parent’s income
£200
| Parent’s tax on it, 2026/27 | £0.00 |
| Parent’s tax on it, 2027/28 | £0.00 |
| Most you can give at this rate and stay under £100 | £2,500 |
All of the interest counts once it passes £100, not just the part above. Grandparents’ gifts and Junior ISAs are outside the rule.
Interest on a child's savings is normally the child's own income, and a child has the same allowances as an adult: the £12,570 Personal Allowance, the £5,000 starting rate for savings and the £1,000 Personal Savings Allowance, so a child with no other income can receive £18,570 of interest a year before any tax. The exception is money given by a parent. Under section 629 of the Income Tax (Trading and Other Income) Act 2005, if money from one parent produces more than £100 of interest in a tax year, the whole of that interest is taxed as the parent's income, not only the part above £100. The limit applies to each parent separately. Gifts from grandparents, other relatives or friends are not caught, and neither is money in a Junior ISA or a Child Trust Fund. A higher rate parent with £60,000 of income whose gift earns £200 pays £0.00 on it in 2026/27.
Sums checked by Radif Partners · Editorial policy · How the sums are done
The rule in law
Section 629 of the Income Tax (Trading and Other Income) Act 2005 treats income from a settlement made by a parent on their own child under 18 who is not married or in a civil partnership, as the parent's income; a stepchild counts as a child for this purpose. A gift of money to a child counts as such a settlement. A de minimis limit of £100 a year applies, but it works as a threshold, not as an allowance: at £101 of interest, all £101 belongs to the parent for tax.
Where the £100 falls at today's rates
At 4 % a year, the limit is crossed once a parent's gift is above £2,500. The table shows what happens next for a basic rate parent on £35,000 and a higher rate parent on £60,000, with no other interest of their own.
| Parent’s gift | Interest a year | Taxed as | Basic rate parent 2026/27 | Higher rate parent 2026/27 | Higher rate parent 2027/28 |
|---|---|---|---|---|---|
| £2,000 | £80 | Child | £0.00 | £0.00 | £0.00 |
| £2,500 | £100 | Child | £0.00 | £0.00 | £0.00 |
| £3,000 | £120 | Parent | £0.00 | £0.00 | £0.00 |
| £5,000 | £200 | Parent | £0.00 | £0.00 | £0.00 |
| £10,000 | £400 | Parent | £0.00 | £0.00 | £0.00 |
For many parents the result is no tax at all, even after the limit is passed, because the child's interest falls inside the parent's own Personal Savings Allowance. The bill appears when the parent's allowance is already used by their own savings, or when the parent pays tax at the higher or additional rate. GOV.UK sets out the allowances in how much savings interest is tax free.
Because each parent's money is tested on its own, a child's account can hold more parental money than the first figure suggests. At 4 %, a mother and a father can each give £2,500 before the interest from either gift reaches £100, so £5,000 in all stays the child's for tax. A stepparent is treated as a parent under the Act, so money from a stepparent is tested in the same way. A higher rate on the account lowers these amounts: at 5 %, each parent's limit is reached at £2,000.
When the parent has savings too
The child's interest is added to everything else the parent earns in interest. Below, a higher rate parent on £60,000 has £400 of the child's interest attributed to them, alongside different amounts of their own. The rate rises from 40 % to 42 % on 6 April 2027 under the Finance Act 2026.
| Parent’s own interest | Tax on the child’s £400, 2026/27 | Same, 2027/28 |
|---|---|---|
| £0 | £0.00 | £0.00 |
| £300 | £80.00 | £84.00 |
| £500 | £160.00 | £168.00 |
Outside the rule
Money from grandparents, godparents and friends is the child's, and its interest is set against the child's own allowances (GOV.UK, interest on savings for children). So is money a child earns. Money a parent puts in a Junior ISA or a Child Trust Fund is exempt from the parental rule because no tax is charged on interest inside those accounts. What happens to that money when the child grows up is on the Junior ISA at 18 page.