Parents of children born between September 2002 and January 2011 are being urged to check if they have an unclaimed Child Trust Fund (CTF) worth up to £500. These accounts were set up by the government as a tax-free savings scheme, but many families are unaware they exist.
How the Child Trust Fund works
From September 2002 to January 2011, parents were issued vouchers to open a Child Trust Fund, or HMRC opened one automatically if no action was taken. By 2012, 6.1 million CTFs had been opened, with 1.7 million opened without parents' knowledge, according to the National Audit Office (NAO).
The government contributed up to £500 in tax-free savings to each account. These funds were designed to give children a financial head start, but they were replaced by Junior ISAs in 2011.
Junior ISA confusion and tax risks
Junior ISAs are tax-free accounts where you can save or invest up to £9,000 per year (in 2026/27) for your child, locked until they turn 18. However, children cannot have both a CTF and a Junior ISA. Having both could lead to an unexpected tax bill, as the Junior ISA would be considered invalid.
One father who set up a Junior ISA for his son was told it would need to be closed because his son already had a CTF. He had invested £55,000 over 15 years, but discovered the CTF had only grown from the government's initial £50 to £130. This left the Junior ISA technically invalid, creating an administrative headache and potential tax liability.
Real-life case highlights the issue
The man told MoneySavingExpert.com: “[Hargreaves Lansdown] says that when the JISA was opened, we would have signed a declaration saying that our son had no CTF. Of course, we had no idea that he had a CTF, as we were not involved in the process of opening one! This is the most ridiculous case of the tail wagging the dog – losing tax-wrapper protection for £50,000 of investments all for the sake of £130 seems absurd.”
What to do if you have a CTF or JISA
Hargreaves Lansdown said it doesn't see cases like this often, but they do happen. A spokesperson for the firm said: "We empathise with how frustrating this will be for [the man] after investing for his son's future over a number of years. We're working with him to explain his options and will take instruction from HMRC should they suggest an alternate route forward."
Parents who think their child might have a CTF can contact HMRC to find out. It's essential to know which type of account your child has to avoid any tax issues. If you have both, you may need to close one to stay compliant with HMRC rules.
Impact on families
This situation highlights the importance of checking for unclaimed CTFs. Many families could be missing out on free money from the government. Even small amounts can grow over time, as seen in the example above where £50 grew to £130.
Experts advise parents to track down any CTF accounts before opening a Junior ISA. This can prevent future complications and ensure your child's savings remain tax-free. With the tax year 2026/27 allowing up to £9,000 in Junior ISA contributions, it's worth getting the right account in place.
