Interest is paid tax-free, and is added to your children's savings account on their birthday.
Interest added to the account will not affect the annual allowances. You can put up to £4,260 into the account each year – starting on the child's birthday and ending the day before their next one. This limit is subject to HMRC Treasury rules and is reviewed each tax year.
As the account is owned by your child, there's no further income tax to pay on the interest earned. Child Trust Fund interest is credited free of personal income tax.