The Government is taking steps to ensure Child Trust Funds (CTFs) remain tax-free after maturity, even if their owners fail to claim their account.
Child Trust Funds were launched by Gordon Brown during his time as Chancellor of the Exchequer and offered all children born between 1 September 2002 and 2 January 2011 a tax-free £500 savings pot.
The scheme was replaced by the Junior Isa in 2011 and tens of thousands of Child Trust Funds are thought to have been forgotten as the scheme has slipped out of public consciousness.
In his Spring Statement, Chancellor Philip Hammond announced that the Government would soon publish rules to ensure CTFs maintain their tax-free status after maturity.
Until now it had been unclear what would happen to the fund after the child’s 18th birthday. In the worst case scenario, the funds may have become liable for capital gains tax after the tax-free status expired.
As the first accounts mature in 2020, the Government will now consult with providers to ensure that holders are not met with an unexpected tax bill after turning 18.
Emma Banks of OneFamily, a Child Trust Fund provider, said: “The thinking is that savings in Child Trust Funds are to remain in a tax protected account until a decision is made by the account holder, either to continue to invest into a saving product, such as an Isa, or withdraw the money.”
However, Mrs Banks urged account holders to claim their account well in advance of their 18th birthday. Parents can ask HMRC for further information if they are unable to locate the account on behalf of their children.