The next step

http www hmrc gov uk childbenefit start claiming how to claim htm

[]

Child Trust Funds - going, going, but not quite gone

Saving for the future

Child Trust Funds (CTFs) were one of Gordon’s brainwaves which had the aim of giving children a financial kick-start in adult life. Not everyone thought that CTFs were a great idea, but whether you were for or against them it makes no difference now as their days are numbered.

Current rules - up to August 1 2010

Until the law changes (probably in early August) the current CTF rules continue to apply. Essentially, this means that if your child is born or reaches the age of seven before the law changes, they will get a tax-free payment from the government.

New rules - after August 1 2010

Assuming the government’s proposal becomes law in August, and you have a child after that date, you’ll still get a CTF payment, but it will be much less than under the current rules: £50 instead of £250, or £100 instead of £500 for less well-off families. But there will be no payment at all when your child reaches seven years of age. And there’s worse news. After December 31 2010 the Taxman won’t be issuing any more CTF vouchers, which means a complete end to the scheme.

Trap. The Taxman will only issue a payment voucher for you to open a CTF savings account if you’ve made a valid claim for child benefit by December 31 2010 (see The next step). If you’re late with your claim, your child will lose out on the CTF payment altogether, irrespective of when they were born.

Tip. Watch out for postal delays. As there’s no online application for Child Benefit, post your claim as soon as you can - bearing in mind that in December things can take a little longer than usual to get there. But this deadline could make it almost impossible to qualify for a CTF if your child is born in the last couple of weeks of 2010.

Taxman’s common sense

We quizzed the Taxman about the impact of Christmas postal delays on CTF claims, and the situation for those who simply can’t make a claim in time because their child is born so late in the year. The HMRC spokesman talked of “common sense” being applied. But we found out that some senior staff at the CTF office expect that the current proposal will be changed. They believe that when it becomes law the cut-off point for payments will be the child’s date of birth and not when the Child Benefit claim is made.

What’s all the fuss about?

As children born after August will, in most cases, only qualify for a £50 CTF payment, you might ask what all the fuss is about. The answer is that once a CTF is open any income or gains generated on money invested in it is tax-free. And family members and friends can between them pay up to £1,200 each year into the CTF account. All interest or capital growth the fund generates is tax-free, which could be a much better perk than the initial £50 hand-out.

For details on how to claim Child Benefit, visit http://tax.indicator.co.uk (TX 10.18.02).