Isn’t it beautiful weather? It seems winter is finally over and holidays are within sight. Even the end of the tax year is approaching - what more could you want, except a glass of aperol spritz in the sunshine?
By now, everyone has tucked away all their Isas and pensions and whatnot to make maximum use of their tax allowances, right? Well, there may be a few who leave it to the last minute. For them, and anyone else who hasn’t earmarked the leftovers for holiday spending money, take a look at this little child savings tax trick I’ve discovered.
To start, you need a child trust fund (CTF). These were dished out to kids born in the UK between 1 September 2002 and 2 January 2011. As an incentive to save, the government (originally) started each CTF with at least £250 (more for poorer kids). A great idea but subsequently CTFs were phased out in favour of the Junior Isa (Jisa) which had no free money.
Because few firms now offer CTFs, interest rates and the choice of products are limited. Many parents have switched their CTF into a Jisa where there’s a better selection. A friend of mine (hello Jude!) was asking the other day how to do it – it’s actually very easy. You find the Jisa company you wish to move to (bank for cash or investment firm for shares) and ask for a transfer form. Fill it in, give it to your chosen Jisa provider and they do the rest - although it may take some time. See the SMM guide to Jisas here.
Before you do that, just check when you made the last contribution. With a Jisa, the annual allowance period runs between the regular tax year (6 April to 5 April the next year). But the CTF period starts on the child’s birthday and ends the day before their next birthday. This difference means it’s possible to double up your allowance.
For example, let’s assume little Oscar’s birthday is Thursday this week, 30 March, and you’ve contributed this year’s allowance already. We’re leaving it a bit late but in theory you could, on Thursday, put in his 2017/2018 allowance of £4,080 and then trigger the transfer to a Jisa. Miraculously, the paperwork is done instantaneously and the Jisa is open several days before 5 April, letting you shove this year’s Jisa allowance (also £4,080) into the pot as well. A double tax saving whammy! You might have to compromise on the ice-cream now but, at age 18, a fully-loaded Jisa is going to taste a lot sweeter than raspberry ripple.
If you think you’re eligible but you never claimed a CTF or you don’t where it’s held, you can get help finding it at http://www.hmrc.gov.uk/tools/childtrustfundclaim/ctfaccount.htm.