Halifax Accounts for Kids

Written by Karen Bryan

Halifax logoThere are three Halifax accounts for kids.

The Halifax Kids’ Regular Saver offers a very alluring fixed rate of 6% for a 12 month term. But, the maximum monthly deposit is £100. The account is available to kids aged 0 – 15 years of age, but it must be opened by an adult aged 18+. Although the rate of 6% paid on the Halifax Kids’ Regular Saver sounds high, you have to take into account that the average balance over the year is only £600, if you make the maximum monthly payment of £100. So the interest earned is 6% of £600, not 6% of £1,200.

The Halifax Young Saver, available for kids aged 0 – 15 years, pays a variable rate of 3% on balances up to £20,000. With the higher balances, you’d need to be aware that if a child is given money from a parent which earns more than £100 in annual interest,  all interest will be taxed as if it were received by the parent. This is to discourage parents from putting their savings into a child’s name to avoid paying tax on the interest. However, if the money comes from the child’s earnings, e.g. a paper round, gifts from grandparents, aunts or uncles, all the interest earned will be tax free.

The Halifax Junior ISA pays a variable rate of 4% if a parent holds a Halifax Cash ISA. Otherwise the rate is 3%. There’s an annual limit of £4,080 for Junior ISAs.

In my opinion, the best of the Halifax accounts for kids is the Young Saver. The rate of 3% is paid on balances from £1 and for kids with larger savings the £20,000 maximum balance is a bonus. The possible advantage of the Kids’ Regular Saver is that it’s a fixed rate, whereas the Young Saver account pays a variable rate.

However, if a parent has a Halifax Cash ISA, then the child’s savings could earn more interest in the Junior ISA, and there wouldn’t be any issues over the £100 income tax rule as the interest paid on Cash ISAs is tax-free.