nEWS AND INSIGHTS

Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

How to gift money to children or grandchildren

Leaving a legacy and passing on your estate to loved ones is usually a big part of people’s financial plans.

Gifts to spouses, civil partners and charities can usually be made tax free. However, gifts to children or grandchildren have different rules when it comes to Inheritance Tax.

What counts as a gift?

A gift can be anything that has a value including money, property and possessions.

How much can I gift to my children?

Each person has an annual exemption of £3,000 per tax year which can be given away free from Inheritance Tax.  Any unused exemption will carry forward for one year.

You can also make more substantial gifts to your children, however the ‘7 year rule’ will apply in terms of Inheritance Tax. If you die within 3 years of making the gift then the full 40% tax will apply to the gift. The tax then reduces on a sliding scale for the next 3-7 years. After 7 years has passed since making the gift, no tax will be due as the gift is no longer included in the value of your estate.

Because of this rule, if you wish to make large gifts to your children you should speak to a financial adviser as soon as possible as it is important to plan in advance to mitigate the risk of tax being due.

Gifting to children or grandchildren for a wedding

Gifts towards a wedding or civil ceremony are up to certain limits automatically exempt from Inheritance Tax. You can gift £5,000 for a child, £2,500 for a grandchild or £1,000 for anyone else.

 Book a no-obligation financial review meeting  

 

Gifting to children or grandchildren from excess income

An underutilised Inheritance Tax exemption is gifting from excess income. Provided that gifting from excess income does not impact your standard of living then there is no limit to the amount you can gift from it making it a tax-efficient way to give assets to your loved ones. 

 

There are many rules around this allowance, for example the gift must be made regularly, and you need to ensure all records of the gift are kept accurately to make sure that the gifts are exempt from Inheritance Tax.

It is important to speak to a financial adviser before utilising this allowance to make sure that you are sticking to the rules.

 

 Book a no-obligation financial review meeting 

 

How do I gift money to family members

As mentioned above, if you wish to gift substantial amounts of assets then the 7 year rule will apply. However, you can also gift £250 per year free from Inheritance Tax to anyone who you have not utilised another allowance for.

 

Find out more about gifting

For more information on gifting to your loved ones and ways to mitigate Inheritance Tax, book a no-obligation meeting with a financial adviser to discuss by filling out our online form or by phoning 0117 973 0500. 

 

 Book a no-obligation financial review meeting    

The bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
 

Enquire Now

If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

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How to gift money to children or grandchildren
2021-07-07T10:45:00+01:00
FourWealth Management