Child trust funds allow parents to avoid tax on savings for their children and, because of this, are a valuable tool, one expert believes.
Anna Bowes, investments manager for AWD Chase de Vere, said that money invested in a child trust fund was exempted from the so-called £100 rule.
Under the rule, once parents started earning more than £100 interest on the money they were saving for the child, then all of the interest would be taxed as if it belonged to that parent.
Ms Bowes said: "That is not the case on the money that is invested in a child trust fund. So, for a parent, it's a way of saving some money for their child avoiding the £100 rule."
However, she said that this did not apply to money contributed to a child trust fund by other relatives.
All children born on or after September 1st 2002 receive a £250 voucher from the government to start their child trust fund.
Money cannot be withdrawn from a child trust fund until the beneficiary reaches the age of 18.
Child trust funds offer savers tax breaks
Child trust funds offer savers tax breaks
Fri, 25 Jan 2008
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