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Home about Nannytax news Child Trust Fund to be axed
Child Trust Fund to be axed PDF Print E-mail
On 24th May 2010, the Government announced their plans, subject to legislation, to phase out their contributions to the Child Trust Fund, with effect from August 2010.

Available to all children born from September 2002, the Child Trust Fund (CTF), is a long-term savings and investment account for children intended to provide a lump sum of money for each once they turn 18 and start adult life. It was also established to encourage parents, relatives and friends to save tax-free towards the child’s future, allowing additional investment into the account of up to £1,200 per year.

At present the Government contributes a sum of either £250 or £500 (depending on family income) after birth, topping up with a second payment of either £250 or £500 once the child reaches seven years old. Since April this year, children entitled to Disability Living Allowance (DLA) have received extra annual payments of either £100 or £200 dependent on the care component of their DLA award.

From 1st August 2010, the government intends to decrease CTF payments given at birth to £100 (for children in low income households) and £50 (for children whose families are better off). The contribution into the CTF on the child’s seventh birthday will be scrapped altogether, including to those children who have already received their first birth payment.

From January 2011, the Government proposes to cease issuing Child Trust Fund vouchers completely.

Legislation is required to implement the above changes and until that legislation is in place, Child Trust Funds will continue as normal.

To read more about the proposed Child Trust Fund changes, please refer to HMRC’s PDF or to the Child Trust Fund website.