Where can my daughter 8years old invest here money after reaching 5K. Is this the max tax free limit in the UK

The halifax says she can only have 5K in the bank account max.

Where else can she invest her money to maximise potential?

I am an accountant but am not empowered under the Finacial Services Act to provide financial advice. Neither is anyone else here, I suspect. Therefore both the financial and tax information I give here is suggestive only and must not be construed as giving professional advice.

I haven't heard about a legal maximum that children may invest. I suspect that the individual financial institutions set their own rules but I may be wrong. It is not something I have come across before.

The Financial Services Authority (FSA) has a website http://www.fsa.gov.uk/consumer/09_SAVING... which provides information not only on Savings but also Mortgages, Pensions, Insurances and other Investments. You may find what you are looking for there.

They also have pages of tables http://www.fsa.gov.uk/tables which show comparitive figures/rates of various institutions.

From the tax angle, the source of your daughter's investment is most important.

You should be aware that any settlements and arrangements made by you through which she receives investment income will normally result in YOU being taxed since she is neither married nor over 18 years old unless that income is less than 拢100. The limit applies to each parent. This is all part of the Inland Revenue's (HM Revenue & Customs) anti-avoidance legislation.

If that proves to be the situation and the income is more than 拢100 per tax year, a Self Assessment Tax Return must be completed.

You can download form R85 from the Revenue website http://www.hmrc.gov.uk/forms/r85.pdf which will allow your daughter to receive interest without deduction of tax. The tax free allowance for 2006-07 is 拢5,035.

It is recommended that you seek professional advice so as to ensure that the correct tax treatment is applied.

i have no idea, sorry. but how does an 8 yr old have that much money? i'm jealous.

look at of shore account were this goverment cant get at it

She should have a childs account, this way it cannot be taxed.. But then again i dont know about it, because i have never knew a child to have that much money, so maybe after so much it does get taxed ???

over seas is your best bet buddy.......

Children pay tax on interest as do adults, but they have the same tax-free allowance of about 5,000GBP per annum (someone will correct me on the exact amount I'm sure). This does not mean that the maximum amount you can have in the account is 5,000GBP. It means that any interest the child earns can be paid without tax deducted, provided they are below the limit, and that the money has not been invested by the parents. Donation by parents can earn interest up to 100GBP. It's all documented in the link I sent, there are probably more authoritative sources out there.

You need to fill out form R85 to have interest paid without tax deducted - the form is a self-certification the child's tax-free status.

The 5K limit is probably imposed by Halifax who don't want to open the preferential rates to abuse. It's the same with all high-street savings schemes - e.g. the "you earn 10% for the first year" deals that are in vogue at the moment. The fine print will tell you that you cannot invest a lump sum at the start and there is a maximum monthly investment, which means that you only get 10% on the first installment, and the total gain relative to a 5% account is a maximum of 40GBP (approximately). It's just a way of drumming up new business.

That's why I haven't bothered with the Child Trust Fund for my son - it locks away your money. If you need it for an urgent medical operation - tough.

The link below also gives some alternative ideas for investing. Personally I think Premium bonds are a bit of a waste of time, they pay about 3% in the long term (usually less if you have a small amount but you might get really lucky and win the jackpot).

Deposit accounts are a better option in my view.