Since the introduction of the child trust fund, a two tier saving system has been formed. One for those children whose parents can invest tax-free and one for children who are too old. Under the child trust fund, parents can invest £1200 each per annum, without any taxation penalties. However for children born after 1 September 2002, parents are liable to income tax on interest earned once the income exceeds £100 in any one tax year.
This could lead to parents not making any saving contributions for their children as to do so would be treating the children differently.
Our view
As ever, the Government get caught with dates. Tax free trust savings should be available for children, not just those who are only a few years old.