The following article is for information only and contains illustrative examples; no particular investment recommendation should be inferred or implied from the information given.
Child Trust Funds (CTF) have been available since April 2005 when parents of children born on or after 1 September 2002 would have received a £250.00 voucher from HM Revenue & Customs. (The value of the actual voucher was slightly higher for children born between September 2002 and 1 April 2005).
To qualify for a CTF the child must be
- born after 1 September 2002
- eligible for child benefit
- a UK resident.
The CTF investment (whether deposit based or otherwise) is able to generate income within a tax free environment and free of any capital gains tax.
When the child reaches 7 years the government will add a further £250.00. To reinforce the taxation shelter of the product, the 2007 budget permitted the underlying investment funds to be deposited into an ISA without affecting the individual’s existing ISA allowance at the age of 18. No withdrawals can be made before the child reaches 18 years old.
One other significant advantage is that parents, grandparents and other relatives can add £1200 each year into the CTF by way of “top up”. The “year” runs from the child’s birthday to the end of the tax year (5 April).
Types of CTF accounts:
There are three types of CTF accounts
- Non-Stakeholder cash accounts
- Stakeholder accounts
- Share accounts
These are set out in the accompanying tables as a comparative guide only, showing how a CTF from each sector has performed since CTFs were introduced. To access the tables, please click here
We would stress that these are illustrative examples only; no particular investment recommendation should be inferred or implied from the information given.
For those readers who may be contemplating investment, within a CTF, expert independent financial advice should always be sought prior to any investment decision being agreed upon.
