Maturing trust funds
Following the results of a consultation, the government has set out new rules for when child trust funds (CTFs) mature. CTFs were introduced nearly 18 years ago to hold tax-free savings and investments, boosted by a government subsidy for children. A change in policy meant accounts couldn’t be opened for children born on or after 1 January 2011, though existing accounts were allowed to continue. The funds can’t usually be accessed, other than to transfer them to a junior ISA, until the child who will benefit from the account reaches 18. This will start to happen in August 2020.
Extended tax advantage
Typically, the parent or guardian responsible for the CTF will authorise the bank etc. holding the account to release the funds when the beneficiary reaches 18. Under current rules the tax-free status is lost. However, the new regulations which will apply from 6 April 2020 allow investments in a CTF account to keep their tax-advantaged status after the account holder’s 18th birthday, which means there will be no rush for parents and their children to decide what to do with the money etc.
Child trust fund accounts will begin maturing in August 2020 when the beneficiaries reach 18. The rules have been changed so that the tax-free status of the accounts will continue after the account holder’s 18th birthday.