Mature CTF and ISA

redchris111

Hello

My daughter's Child Trust Fund matured a few weeks ago, and we are trying to decide what to do with the money (circa 15k). She has also been given some money (about 10k) by her grandparents which she is planning on putting into an ISA.

Is she able to open an ISA while deciding what to do with the mature CTF. Or does she have to empty the CTF first. I know you can't have an ISA and CTF for the same child, but I'm not sure if that is still the case once the CTF matures.

Thank you in advance!

refluxer

I guess the first thing she needs to think about is whether she actually needs an ISA, bearing in mind she can earn up to £18,570 PA in combined salary and savings interest income without paying tax on her savings interest.

https://www.moneysavingexpert.com/savings/tax-free-savings/

If she's thinking about going to university then student loans don't count as taxable income, either.

If she's unlikely to exceed that figure for a while, then it would only make sense to pay into a cash ISA if it was paying a higher rate of interest than the equivalent non-ISA account.

xylophone

https://www.moneysavingexpert.com/savings/maturing-child-trust-fund/

Presumably your daughter has been contacted by the provider - what is said about how the account is managed pending her instructions?

redchris111

xylophone said:

https://www.moneysavingexpert.com/savings/maturing-child-trust-fund/

Presumably your daughter has been contacted by the provider - what is said about how the account is managed pending her instructions?

They sent a fact sheet which said that there was no rush for her to decide what to do with the CTF. The sheet said "If we don’t hear from your teen, the money will simply stay in the Child Trust Fund until they decide what to do."

This implies that she could open an ISA as well, but doesn't quite spell it out.
I'm going to phone them to check.

redchris111

refluxer said:

I guess the first thing she needs to think about is whether she actually needs an ISA, bearing in mind she can earn up to £18,570 PA in combined salary and savings interest income without paying tax on her savings interest.

https://www.moneysavingexpert.com/savings/tax-free-savings/

If she's thinking about going to university then student loans don't count as taxable income, either.

If she's unlikely to exceed that figure for a while, then it would only make sense to pay into a cash ISA if it was paying a higher rate of interest than the equivalent non-ISA account.

That's a good point thank you.
I guess I want to minimise the risk that she ends up paying interest. But, assuming she got a minimum wage job, she would have to work pretty much full-time to get to £18.5k a year. So the risk that she would need an ISA to  avoid paying tax this year is very low.
I guess the advantage might come in future years. The money she puts in the ISA this year will be protected from tax when she does become a taxpayer?