MARTIN Lewis has issued a warning over a Christmas gift that children love – as it could come back to cost them.
The Money Saving Expert shared his tip in recent days as parents plan festive presents in the coming weeks.
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He said while cash can seem like an easy gift that youngsters are bound to love, it could get taxed – and cost families more.
Martin said that’s particularly an issue if the present comes from parents or step-parents.
The expert said: “What’s the tax situation with children? They pay tax, just like adults. But most children don’t earn any money.”
He said much like adults, kids can earn a minimum of £12,500 a year before it’s taxed.
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Martin continued: “In fact, once you add in the personal savings rate and the starting savings it’s more like £18,000 per year, that’s before paying tax on it, which would be a hell of a lot of money.
“The difference though, is that if it is a gift from parents or step-parents (not grandparents, not aunties, not uncles), and interest over £100 a year is created then that is taxable at the parents’ savings tax rate.
“So if parents pay tax on savings, which a couple of years ago I said no one would because you needed so much to earn £1,000 interest a year that a basic rate taxpayer can earn tax-free, but now with interest rates being higher, many more parents are being taxed on savings.
“If you’re being taxed on savings and you’re giving money to your kids, that’s when a Junior ISA really pays off, because it protects them from paying tax at your savings rate.”
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The Money Saving Expert often shares tips and tricks for Brits to save cash – and get free money or goods.
He recently told of how people could get a free £50 from a major energy supplier.
Martin urged energy customers to check if you they are able to claim.
With the cost of living looming upon us, millions of British households could bag free cash to spend this winter.
It comes as Martin warned millions they could be owed £1,000s from their energy provider.
He also recently shared the exact date Brits could get £120 worth of No7 products from Boots for just £35.
The expert also recently issued an urgent warning to every Christmas shopper who risks losing hundreds of pounds in seconds over a retailer “trick”.
The Money Saving Expert consumer champion offered money-saving alerts as the latest “Black Friday” deals were advertised on Amazon.
