Child Trust Funds

On 24 May, the Chancellor announced that Child Trust Funds would be withdrawn, in stages.

Payments at age seven will be stopped from 1 August and payments at birth scaled down. Children in better-off families will get £50 and children in lower income families £100. Payments will be stopped altogether from 2011. If you do want to claim your Child Trust Fund, make sure you do so whilst you still can - indications are that around 25% go unclaimed.

Existing (and new) Child Trust Funds will continue to operate until the child is 18, as currently. Family and friends will still be able to contribute up to £1,200 annually to a fund and the money will grow tax-free. However, there will be no further Government contributions.

Patricia Mock, a director in the private clients practice at Deloitte, says: "Even after new Child Trust Funds are abolished, don't forget parents can give each child an income of up to £100 every year tax free, and grandparents and others can give direct to the child and income on the capital given, up to the single person's allowance, will be tax free in the child's hands. This could allow capital of up to £220,000 to be gifted."

Full details of the Government's proposals and FAQs are here