Child Trust Funds – Budget 20 March 2013

Junior ISAs were introduced from 1 November 2011. A Junior ISA is a type of

children’s saving account designed specifically to replace the now defunct child

trust funds and it is aimed at providing parents, grandparents and any other

person or organisation who wishes to contribute with a simple and tax-free way

to save for the child’s future.

All individuals, including minors, are entitled to their own personal tax allowance.

For the year which started on 6 April 2013 this is £9,440, so on an initial glance

this tax free opportunity may not look that attractive. However, when the capital

invested is from the child’s parents then, for tax purposes, interest paid on that

capital in excess of £100 is deemed to be that of the parent. Should that parent

be an additional or higher rate tax payer this could amount to a significant tax

saving which would otherwise be taxed via the parent’s self-assessment tax

return.

The investment can be either a cash investment or a stocks and shares investment

with an annual limit of £3,600 being contributed in total to either account or a

combination of the two accounts; but there can only be the two accounts. The

government has not set a cap on the minimum contributions required and it is

understood that some providers will accept a minimum balance of £1 for a cash

Junior ISA and contributions of £10 per month for a stocks and shares Junior ISA.

Contributions to the Junior ISA limits will be fixed at £3,600 per annum until April

2013 after which they will start to increase each year in line with the consumer

price index.

The accounts are available to children born on or after the 3rd January, 2011,

or before 1 September 2002 who missed out on the children’s trust fund (CTF).

However, unlike the CTF there is no government contribution.

If your child has a CTF then there is currently no possibility of a Junior ISA nor can

you or your child transfer the funds from the children’s trust fund into a Junior

ISA. The Budget announced a consultation on ways in which the savings held in

child trust funds can be smoothly transferred into Junior ISAs.

Back to Main Page – Budget 20 March 2013

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