Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
The interest on these building scoiety accounts, unless they are cash ISAs, must, of course, be declared for Income Tax purposes. Otherwise there is no requirement to declare these moneys, nor their ultimate payment to your step son. The UK dooes not have a gift tax regime. Just thank your lucky starts you don't live in France where gift tax kicks in a 5K euros.
The Inland Revenue crased to exist some years ago when it merged with HM Customs and Excise to form HMRC. You should advise your tax office of the error in your self assessment tax returns and amend them. HMRC may charge you interest on the underpaid tax and may, and I only say may, impose penalties, but I think the latter course rather unlikely as the policy on the imposition of penalties is under change.
I do hope that I have been able to set your mind at rest on these matters.
Thank you for your support.
My last post paragraph 2, line 1 delete 'scoiety' insert 'society.'
Paragraph 3 line q delete 'crased' indert 'ceased..'
I should perhaps have mentioned that although the UK does not have a gifts tax regime any gift over 3K in one year would create a Potentially Exempt Transfer (PET) in your Inheritance Tax (IHT) account. PETs run off at a taper over seven years and in the event of your demise in that period are added back to your eatate and are the first to suffer IHT. If your estate is insuffcient to meet the IHT on the PET it cascads down to the beneficiary for immediate payment. IHT does not kick in until assets on death exceed 325K, at 40% on the surplus, and inter spousal bequests do not count. The classic defence is a reducing term life insurance policy on the donor.