There is no mimimum age for paying most taxes. If a child is born very rich (and they parents have not set up a tax free trust) then the child can start paying Income Tax from the day it is born. Most kids start paying tax about 10 minutes after they get their first pocket money and spend it all on sweets (which have VAT on them).
Originally Posted by neo6776
so basically, your parents put say Ј10,000 in an account for you before your born and by the time your 18 to get it youll have about Ј2,000 left after it gettin taxed for 18 years??
No. Because people only get taxed on their interest (which is income), not the original Ј10,000 (which is capital).
However, money from parents does not count as the kid's. So lets assume it if from an uncle instead.
Uncle puts in Ј10,000 in a savings account paying
5%. Income tax is 20% of the interest. Interest in the first year is Ј500 and Ј100 of that could be taken as tax. Of course, Ј500 is well under the kid's personal allowance level so, unless the kid has more income from somewhere else, this does not happen. The kid would need to have about Ј90,000 in the account to owe any tax.
By age 18 the account will have grown to Ј24,066 and the interest will still be less than the tax threshold. Inflation will have eaten into the value of the money a bit but it should still be worth considerably more than the original Ј10000.
I calculated that all my savings are getting an average of 4.59% even after tax. That is at least 2% more than inflation! Not bad for a no-risk investment.
Moral: Saving is good. All the people who say that saving is no good because of inflation and tax are idiots.