Children’s bank accounts

It’s unlikely your child’s current account will be taxed. 

Both children and adults have a personal savings allowance which changes each tax year. That means everyone can earn up to this amount before it gets taxed. 

This is boosted further as children are also eligible for the £5,000 starting rate for savings and the £1,000 personal savings allowance, so they can earn £18,570 this financial year before paying tax. This takes most children’s savings out of the tax bracket.

If you are giving your children money to put in their own account, be aware that if the money earns more than £100 in interest a year, the whole lot will be taxed at your tax rate. 

The £100 limit doesn’t apply to money:

• given by grandparents, relatives or friends

• in a Junior ISA or Child Trust Fund

If a child is liable to pay tax, any tax due on interest earned will need to be paid to the appropriate tax authority. For more information, see the GOV.UK website. 

Banks want to attract new customers so most familiar high street banks in the UK offer children’s current accounts often with incentives to entice you to sign-up. They are not your only option though. Newer so-called challenger banks -including the new digital banks - are also starting to offer children’s current accounts, so there should be plenty of choice. 

Your child’s bank account will usually automatically upgrade to a standard adult current account when they turn 18. If your child has a savings account, their bank may offer them a children’s current account once they reach the age of 11.

If you’re looking for an alternative to a children’s bank account that doesn’t involve them carrying around a lot of cash, then a prepaid card is another option.

You can load your child’s prepaid card for free, and they’ll then be able to use the card to withdraw cash and make purchases.

Some prepaid cards also offer real-time spending notifications to help your child manage their money. Prepaid cards do not usually come with a current account, so your child won’t have a sort code or account number, but they can still make payments online.

The Current Account Switch Service pledges to make switching current accounts simple, reliable and stress-free. It’s a guarantee you’ll be switched to your new bank account – in this case children’s bank account – without any mistakes. You simply open the new account and pick your switch date. 

A week before your new bank will start setting up your new account and any payments that go to your old account will be redirected. When switch day arrives, the balance will move to your new account and your old one will close.

There are lots of types of current account to suit all sorts of personal situations. These include:

• Standard: For managing ordinary income and expenditure, usually with a debit card, a cheque book and an overdraft
• Basic: No-frills accounts which come with fewer features, designed for people with bad or no credit history
• Packaged: These come with various bonuses, including things like interest-free overdraft, insurance add-ons and discounts for other banking products. They usually have monthly fees and eligibility requirements
• Student/graduate: Current accounts designed to cover the particular financial pressures faced by students and recent graduates, normally including larger interest-free overdrafts
• Joint: Accounts designed for two or more people, to cover household expenses or couples’ expenditure
• Children’s: These have few features and are designed to introduce children to banking and saving

Some current accounts come with extra benefits for the account holder, like a cash bonus for signing up, better interest rates or even breakdown cover. The accounts might only be available to certain customers, like those with high credit ratings.

Some current accounts include fees if you use them in a certain way – some banks might charge you for resending a printed account statement or for accessing your account abroad. You may even be charged a fee for going into your overdraft without telling your bank beforehand.

If you tend to stay in credit and never go overdrawn, you could get rewarded regularly by your bank or building society. By switching to a rewards current account, you could get a monthly reward payment and earn cashback on your spending. Some providers will also offer a cash incentive for switching your current account to them.

Many rewards accounts have requirements such as paying in a minimum amount eachmonth, or having a minimum number of direct debits, so make sure you can meet the criteria to get the rewards.

If you’re fed up with getting poor customer service from your bank, switch your current account to a provider that’s known for looking after its customers.

As well as making your life easier, some of these accounts offer extra benefits such as competitive overdrafts or cashback for switching.

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