Thursday, 14 November 2013

The Tax benefits of Children’s Bonus Bonds

Children’s Bonus Bonds are a tax-free investment issued by National Savings.

The maximum investment in the bonds is £3,000 per issue, with a minimum investment of £25 per issue.  The term of investment is a minimum of five years.

The benefit of Children’s bonus bonds are that they allow investments to be made in the child’s own name, along with the fact that there is no tax to pay on the interest or on any bonuses earned.

This is a useful product for generating income for your children and developing a lump sum saved for your children's future.  This investment is not affected by the rules concerning income generated by gifts from parents for children.

For issue 35 bonds, each £25 unit earns a current interest rate of 2.50% AER, guaranteed over five years and a five-year bonus.


John invests £3,000 into an issue 35 Children’s Bonus Bond for his two-year-old son Oliver. The bond earns interest at a rate of 2.50% AER guaranteed over five years (as mentioned above).

After five years the bond will be worth £3,394.22. John has earned tax-free income for his son in the sum of £394.22.

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