Fact sheet

Child Trust Funds

HMRC stopped issuing new Child Trust Fund vouchers on 1 January 2011.

The Child Trust Fund was the centrepiece of the Labour Government's plans to encourage asset-based welfare. According to the Labour Government , the Child Trust Fund would help engender a savings habit among children; providing a cushion of financial assets as they embark on adult life and empowering them to be confident in the management of their financial affairs.

Main features of the Child Trust Fund

Child Trust Fund accounts became fully operational in April 2005. All children born in the UK between 1 September 2002 and 2 January 2011 were entitled to one. The main elements of the Child Trust Fund (CTF) were that:

  • All CTF providers are required to offer the 'stakeholder' CTF account, invested predominantly in stocks and shares.
  • The Government will make a further payment of £250/ £500 into the CTF on the child's seventh birthday. The Government envisaged a third payment would be made when the child is of secondary school age.
  • Family and friends were able to pay in up to £1,200 a year between them. (This increased to £3,600 from 1 November 2011,£3,720 for the tax year 2013/14, and £4,000 for the tax year 2014/15)
  • Children in families receiving Child Tax Credit received an additional £250.
  • The Government made a £250 contribution for each child.
  • Parents decide which CTF account to open on their child's behalf. If they fail to open a CTF account within a year of having received a CTF voucher, the Revenue will open a stakeholder CTF account on the child's behalf.
  • No money can be withdrawn from the CTF until the child reaches the age of 18.
  • All capital gains, interest payments and any other money (such as dividends) earned on a Child Trust Fund are free of tax.
  • Although they can't withdraw money from the account until they are 18, children legally take control of their Child Trust Fund when they reach 16.

The government's CTF website can be accessed here.

Coalition Government changes to Child Trust Funds

On 24 May 2010 the Coalition Government announced plans to reduce government contributions at birth, and to stop government contributions at age 7, from 1 August 2010. It also announced that HMRC would stop issuing new Child Trust Fund vouchers from 1 January 2011. Therefore children born after 1 January 2011 are not eligible for a Child Trust Fund. But accounts set up for eligible children born before that date will continue to benefit from tax free investment growth and no withdrawals will be possible until the child reaches age 18.

Junior ISAs

In October 2010 the Treasury announced a new tax-free children’s savings account, the Junior ISA, which aimed to replace the Child Trust Fund. The Junior ISA was launched on 1 November 2011. Further information can be found in our Junior ISA Factsheet, linked to below.

Subscription Limits

The annual subscription limit for Child Trust Funds and Junior ISAs for the 2019/20 tax year is £4,368.

Junior ISAs - BSA Factsheet

Transfer of CTFs to Junior ISAs

On the 23rd December 2013 the government announced that transfers from CTFs to Junior ISAs would be allowed from the 6th April 2015 onwards. Further information can be found via the link below.

CTF transfer to Junior ISA announcement