The second round of Child Trust Fund (CTF) payments have started, with a lump sum of £250 added to the accounts of children reaching the age of 7. Another £250 will be added after the end of the tax year for children of low income families – about one third of the recipients.

The CTF scheme has not been a great success. Since the first payments began in April 2005, about a quarter of all the CTF vouchers have been left unused for a year, at which point a CTF is opened automatically by HMRC. Only a third of accounts have attracted any additional (non-state) payments, the limit for which is £1,200 a year.

If your child is eligible (born after 31 August 2002), the CTF does offer some tax benefits for parental gifts, the income from which might otherwise be taxed back on the parent. However, there are other tax-efficient opportunities available with fewer constraints.

ACTION

If, as Christmas approaches, you want to make a gift of money to a child – whether your own, a grandchild or somebody else – the CTF is just one possible route to follow.

For advice on all the options on investment for children, please call us.

 

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This news item is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as at August 2009. No action must be taken or refrained from based on its contents alone. Accordingly no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.

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