Bank and building society interest - Example 5
Vicky, aged 12, has £7,200 in her building society account. Her father had given her £2,400, her mother £1,200 and her uncle £3,600. The interest on the gift from her father comes to more than £100, so Vicky’s parents cannot register her account to get interest without tax taken off.
The interest Vicky gets and the amount of tax that can be claimed back are
Father’s gift |
|
|---|---|
Her father’s gift of £2,400 produced net interest |
£88 |
The amount the building society took off for tax was |
£22 |
The ‘gross’ interest is |
£110 |
As the gross interest is over £100, none of that £22 can be claimed back. The interest is treated as income of Vicky's father and taxed accordingly.
Mother’s gift |
|
|---|---|
Her mother’s gift of £1,200 produced net interest (that is, after tax was taken off) of |
£88 |
The amount the building society took off for tax was |
£22 |
The ‘gross’ interest is |
£110 |
Uncle’s gift |
|
|---|---|
Her uncle’s gift of £3,600 produced net interest |
£132 |
The amount the building society took off for tax was |
£33 |
The ‘gross’ interest is |
£165 |
As people other than parents are not affected by the £100 gift rule, Vicky's parents can claim back for her the £33 tax that was taken off the interest from her uncle's gift.
The total Vicky's parents can claim back for her is therefore £44 (£11+£33).
