The first Child Trust Funds (CTFs) have reached maturity this month, automatically becoming adult ISA’s. Account holders who are turning 18 will now have full control over and access to their fund.
CTFs were tax-free children’s savings account set up by the Government in 2005, available to children born between 1 September 2002 and 2 January 2011.
Parents or guardians of a child who was eligible for a CTF would have been sent a voucher by HMRC, worth £250 or £500 for low income families, to establish the fund.
Once an account was set up, further deposits could be made up to £9,000 (2020-21) each tax year. It’s likely that the sums held in CTF accounts will vary hugely, dependent on whether contributions were maximised, from around £500 up to tens of thousands of pounds.
However, it is believed that thousands of potential CTF holders do not know that they have one and that many parents may have forgotten that an account was set up in their child’s name, particularly as a number were set up by HMRC.
Each account is managed by a ‘registered contact’ who can tell the account provider how to invest the fund and run the account, change the address and other personal details, change the type of account, and move the account to another provider. They cannot, however, access funds in the account themselves.
When a child turns 16, they are allowed to take control of the account, but cannot withdraw money from it until they turn 18, at which point they can withdraw funds or transfer it to a different savings account or continue saving into their CTF account, should they wish to.
Withdrawing funds means you will forfeit the tax shelter afforded by the account, but most people’s personal savings allowance and capital gains tax allowance should be enough to ensure no tax is due initially.
If the CTF holder opts to transfer the funds to another ISA, it is worth keeping in mind that the amount will not count towards the annual ISA allowance of £20,000 (2020-21).
When a CTF was set up, the parent or guardian should have received the child’s Unique Reference Number, which will also appear on annual CTF statements. This will also include details of the account type and the provider. These account statements should have been received regularly once the account was set up.
Any child born between 1 September 2002 and 2 January 2011 who is turning 18 can check to see if they have an account by filling out a form on the gov.uk website by clicking here.
In 2011, the scheme was replaced with Junior ISAs, which are also inaccessible until the child turns 18. Money held in a Junior ISA is tax-free and up to £9,000 can be deposited into an individual account during the 2020-21 tax year.
How can George Hay help?
Our expert tax advisers can help you to employ a tax-efficient strategy when it comes to your savings, considering the allowances available to you and any liabilities that could arise as a result of investments. Contact us today, to talk to one of the team in Bedfordshire, Cambridgeshire, or Hertfordshire.
Link: Child Trust Fund