As part of the 2018 Budget, it was announced that the Government would publish a consultation in 2019 on draft regulations for maturing Child Trust Fund accounts.
Child Trust Funds initially became available for children born between 1 September 2002 and 2 January 2011 which means the first set of accounts will begin maturing in September 2020 when the first children reach 18. At present, without legislative change the investments will lose their tax-advantaged status at maturity.
The consultation is aimed at seeking views to ensure that funds in maturing Child trust Fund accounts can retain their tax-advantaged status after maturity. The consultation, together with draft regulations and a tax information and impact note has now been published
The changes to the regulations will provide the ability to transfer the investments at maturity to a tax-advantaged ‘matured account.’ The ‘matured account’ can be a continuing Child Trust Fund account, or a cash ISA or stocks and shares ISA offered by the original CTF provider. The funds held in the ‘matured account’ will therefore retain their tax-advantaged status and will also be subject to the terms and conditions which applied before maturity. It will not be possible to make subscriptions to the ‘matured account’ and it must be retained by the original provider.
For those who may not have any immediate use for the funds, this will no doubt be a welcomed change as savers will be able to continue to benefit from the tax-advantaged status rather than having to fully withdraw the funds.
The closing date for comments is 11 August 2019.
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