A Child Trust Fund (CTF) is a long term tax-free savings account for children, designed to encourage them to develop a savings habit for their future adult life. Child Trust Funds were available to all children born in the UK whose parents were awarded child benefit between 1st September 2002 and 2nd January 2011.
All money earned in a Child Trust Fund is tax free, including capital gains, interest payments and any other money earned on the account. This means all the money in the fund belongs to the account holder and none of it will be lost in tax deductions.
On maturity, Child Trust Funds can either be cashed in or transferred into an adult ISA. If you have a Child Trust Fund and do not inform your provider what you would like to do with the money in it on maturity, the money will be held in a ‘protected account’ until you contact them.
You can’t apply for a new Child Trust Fund because this government scheme is now closed, but you can keep an existing one.