Top Children's Savings Accounts

Whether you should get a junior ISA depends on two things – if your kids pay tax now (almost all don't), and if you want to lock the cash away, or retain more control over it.

If your kids don't pay income tax (child prodigies watch out!) then they'll be able to earn £18,500 in savings interest before having to pay tax on it, meaning that a junior ISA isn't really necessary.

But if they'll have high levels of savings once they turn 18, a junior ISA could be a good plan, as these convert to full cash ISAs when the child turns 18, meaning they remain permanently tax-free.

Junior ISAs lock cash away until the child turns 18 – at which point it's their money. With the accounts in this guide, most allow access at any time, giving you more control.

See our Junior ISA guide (and our Child Trust Fund guide if your child was born between 1 September 2002 and 2 January 2011) for more info on whether they're right for you and best-buy accounts.

If it's their own money, children can earn the same £18,500 a year in interest as adults before it gets taxed. However, don't assume you can dunk fortunes in your kid's name.

As we've explained, if a child generates more than £100 in interest over the course of a year, from money specifically given by each parent (or step-parent) (so £200 for a couple with a child), this income falls under that parent's PSA. And if they've used their allowance up, it'll be taxed at their rate.

In practical terms this means you could put up to £4,422 in the 4.5% top-paying children's account (£2,211 per parent), and it wouldn't be taxed, as that would generate about £99.50 each. Just to clarify, this doesn't mean £4,422 every year; it's the interest generated from all cash given in this and previous years.

One way around this is with junior ISAs, where £9,000 can be saved in the child's name and is free of tax regardless – read our full Junior ISA guide.

Also, these rules only apply to parents, not grandparents, aunties, uncles or friends. They may all give your children as much as they like and, providing it's a genuine gift, it counts as the child's money without a £100 limit.

The only other tax implications of making cash gifts is the possible spectre of inheritance tax if the donor dies within seven years of making it.

A warning for bright sparks thinking: "If I gave my brother's kids £20,000 and he gave mine the same...?" Good thought, but no cigar. If HM Revenue & Customs spots you, you're in trouble.