Child Trust Funds/tax credits to be scaled back under new Government
As the new Coalition Government gets underway, it has been revealed that Child Trust Funds (CTFs) will be reviewed and while full details are not yet clear, it is believed that payments will only be made to families with household incomes of less than £16,000 a year.
CTFs were introduced in 2005 and have been available to every child born after September 2002. The Government gives a £250 voucher, rising to £500 in the case of low income families, to all newborn babies.
Parents are encouraged to use the voucher to set up a long-term savings or investments account which the child can access when he/she reaches 18.
Each year, an additional amount of up to £1,200 can be paid into the CTF account, which will be tax-free.
The previous Government also promised to make a one-off payment of £250 into all CTFs when children reach the age of 7.
Kate Moore of Family Investments comments: “The CTF scheme has helped to create a generation with a head-start in life and social mobility is likely to suffer if young people are unable to meet the costs of higher education or find the money required for a deposit on a first property.”
Research conducted by Family Investments earlier this year found that 96% of parents think CTFs are a “good thing”, with many pointing out that it had encouraged them to save for their child’s future.
In the meantime, the new Government has outlined plans to review the tax credits system. Again, while full details have not been outlined, it is understood that tax credits will be scrapped for those earning £50,000 or more.
However, those earning more than £40,000 may also be affected.
In other news, the coalition Government has confirmed that it is proposing to scrap the Home Information Pack (Hip), while retaining energy performance certificates, which are required under European law.