Can anyone shed light on how a UK Chiuld Trust Fund is treated at disposal for an 18 year old living at home with his family.
My son turns 18 is June 2025 - and on that date his UK Child Trust Fund must be ‘cashed in’ and paid out to him directly, into a bank account in his name, in France. His fund at the moment holds circa £7.5k - but there is an unused allowance of 9k per year that a godparent would like to take advantage of - so the fund could be worth a little over £25,000 when it comes to maturity.
What are the rates of tax/social charges payable if any? Will the capital be treated as a ‘gift’ or purely as his own savings/money?
Thanks in advance
I think they are no different from other tax free UK savings like an ISA. So he will most likely have to pay the full tax and social charges of 30% on the sum. It’s still before the tax period opens so go and ask your tax office.
Is he still part of your family tax return? Perhaps you needs to check whether this money would be considered as income that can be part of the tax free amount which is approx €12k, and do the calculation as to whether works better if on your family return or whether he needs ro start doing his own.
My gut feeling, not have done the calculation, is there is no point adding to it now. Better for him to be gifted the money to put into a French tax free account if he plans to stay in France, or into a standard NS&I account if he might return to UK.
Thanks Jane - what I am trying to ascertain is whether or not the capital will also be taxable or just the interest - I have no problem paying 30% tax/social charges on any gain. It is the capital that is in question.
Any ideas on that from an ISA perspective?
Sarah
I did cash in an old account a couple of years back and just paid tax on the gain - in euros using exchange rate on day of withdrawal. It was never questioned.
But just my experience as haven’t looked up rules.
From the realization of the gain in disposal you will be liable for CGT but only on the gain.
You need to consider if your son will be in education then and if that’s the case he will be on your tax declaration. So in this instance you depending on your household income you could elect for this to be tax using the taxation scale instead of paying CGT at 30%.
Also depending on your situation you may qualify for impatriate status and in this instance would only pay 50% of the CGT… if you have moved to France with an employer and on a local contact this could be your situation. Not sure how long you have been here.
In terms of the gift assuming it’s from a UK resident then it will sit in the godparents estate for 7 years but not a concern for you in France.
So just the gain to pay tax on….
Thanks Dave – most helpful.
We are French residents and have been here for 10 years. Since leaving the UK we have not added to the CTF – so little or no gain over the years. It currently sits at £7.5k – so if a godparent were to add 9k before his 16th birthday for a gift this June – the fund will be at 16.5k on our family declaration for 2024 IR in 2025. There would also be some interest on the new amount of capital…….
Would the deposited 9k be considered as a gain and taxed at 30% ? Or just the resulting interest?
At disposal – how is the final gain calculated if interest has already been paid on any gain on an annual basis?
Thanks in advance for your help
Sarah
Hi, no it’s a gift that sits in the godparents estate so not a gain.
Just add the £9k to the total amount invested then take this away from the value at disposal and you’ll be left with total gains.
E.g if you have put in
9k + 9k + 7.5k = 25.5k
At disposal value is 26.5k then you have 1K gain.
This is what you declare and pay CGT on.
Thanks – so to be absolutely clear – my son is a French resident and for tax purposes is included on our family tax return as he lives at home – and he is likely to still be in education at 18.
The company that runs the Child Trust Fund in the UK tells me that at 18 the fund must be closed and the funds paid into an account bearing my son’s name. It will appear simply as a money transfer with his CTF account number as a reference. There won’t be a breakdown of what came from who - and this is likely to happen sometime soon after June 2025. On arrival of said funds then we need to be able to ascertain the total cash invested over the years and then subtract that from the amount at disposal to calculate the gain. It is this amount of gain we declare on our family tax return in 2026 for IR 2025. That seems logical and clear to me.
One final question if I may – the account has not been included in our overseas list of accounts as I did not realise it needed to be! No reason other than as we have never received statements of any kind I assumed everything was cumulative and to be dealt with at the end of its time – i.e. when my son turns 18. I have asked the CTF managers for statements which they now say they can send me in early May – what if anything should be declared on my tax return this year for 2023? I should of course add it to the list of overseas accounts but what to do about any interest accrued annually over the past ten years? Should I include it on this coming tax return? Or wait until the end game when the money comes into France into his account? My thinking is that if I declare it and any gain/interest accumulated up to this year it will be ‘taxable’ now – and then going forward I declare NEW interest only for each year accordingly. Is that the way to treat it? If so, is tax then still payable on the total gain at disposal despite the fact that tax would have been paid on interest accrued annualy, thus making any interest taxed twice.
Sorry to be a bit woolly around the ears – just trying to ensure that my son gets the most out of his fund for his university years and that we do things correctly when it comes to declarations and paying taxes/social charges due!
Thank you
I wouldn’t try and make it too complicated as you are doing the right thing and declaring and paying tax on the gain.
If you wanted to be perfect you’d contact impot through your online account and say you had forgot to declare a capitalization contract and give them the details of it… as you would if you were to declare on 3916. It’s likely they will say no problem and declare it on this years tax return. I’m sure that would be the case based on the amount and the open approach. If you get someone difficult technically failure to declare and account could be a fine if €1500 per annum back 3 years… I think this is unlikely as they do appreciate people notifying them if they have made an error.
If it was me I’d declare it this year on the 3916 as a capitalization contract with provider info etc and it will likely not even be noticed.
If it’s declared as a capitalization contract then France would understand this means there is gross roll up inside the wrapper. Again not technically the case but would avoid declaring gains annually and actually in real terms won’t make a difference.
Then you declare it again next year on your tax return and the gain in 2026 when you’ll be declaring 2025 gains.
I think you are being very honest and I am sure alot of people would just have it paid to a UK account in his name and not say a word and probably get away with it.