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Parents missing out on CTF tax breaks

Parents missing out on CTF tax breaks

Category: Savings

Updated: 23/02/2010
First Published: 23/02/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Parents will waste £63 million in tax breaks by not making full use of their children's Child Trust Funds (CTF) allowance this year, new research has revealed.

Only a quarter (24%) of the CTF accounts opened since their launch in 2005 have welcomed additional deposits, while a paltry 1% have received the maximum funding of £1,200 per year, according to Unbiased.co.uk.

The website claims that even if only half of the CTFs which had received no extra funding besides the initial £250 voucher had been topped up to the maximum amount, the additional tax saving would amount to £63 million in total.

Meanwhile, the research also showed that just three quarters (72%) of eligible children have had a CTF account opened for them.

Although around 4.3 million CTF vouchers have been issued since the accounts were introduced, only 3.1 million accounts have been opened.

"The Government introduced Child Trust Funds as a way of helping parents plan for their children's futures," said Karen Barrett, the website's chief executive.

"However, our research has shown that parents are not making the most of this opportunity. Parents don't have to pay tax on the interest earned on a CTF account and by not using their full funding allowance each year they may potentially be gifting the taxman more money than necessary."

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