Tax planning for children
Children can have tax-free income of up to £7,475 in 2011/12. However, investment income of more than £100 a year derived from a gift from a living parent is taxed as that parent’s income if the child is under 18 years old and unmarried.
Older teenagers could work in a parent’s business for a reasonable salary.
Where a child is a beneficiary of a discretionary or an accumulation and maintenance trust, the trustees could distribute some income so that the child can reclaim some or all of the 50% tax paid by the trust on the distribution.
Children aged 16 can set up a cash ISA and many younger children can have a junior ISA.