{"id":30083,"date":"2023-11-21T15:55:55","date_gmt":"2023-11-21T15:55:55","guid":{"rendered":"https:\/\/taxfix.com\/en-uk\/?p=30083"},"modified":"2025-02-11T15:53:32","modified_gmt":"2025-02-11T15:53:32","slug":"gifting-money-to-children-tax-efficiently","status":"publish","type":"post","link":"https:\/\/taxfix.com\/en-uk\/investor-capital-gains-tax-returns\/gifting-money-to-children-tax-efficiently\/","title":{"rendered":"Gifting money to children tax-efficiently"},"content":{"rendered":"\n<p>If you understand it, <a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/tax-efficiency\/\">tax efficiency<\/a> is the gift that keeps giving. But let\u2019s be honest, most people don\u2019t understand it, and it breaks our hearts \ud83d\udc94 But in the spirit of Christmas, we\u2019re giving you the <em>ultimate<\/em> guide to <a href=\"https:\/\/taxfix.com\/en-uk\/the-tax-basics\/gift-tax\/\">gifting<\/a> money to children tax-efficiently. Thank us later!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The parameters of your present&nbsp;<\/h2>\n\n\n\n<p>Let\u2019s start with the basics &#8211; the bits you want to know, the facts, the stats and the best way to gift children money:&nbsp;<\/p>\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-columns-mini m-align-left\">\n    <div class=\"b-columns-mini__container\">\n\n        \n        \n        <div class=\"b-columns-mini__item m-purple\">\n                                    \n            <div class=\"b-columns-mini__item-content\">\n                <div class=\"b-block-body\">\n                    <ul>\n<li>\u00a33,000 is your total personal allowance<!-- \/wp:list-item --> <!-- wp:list-item --><\/li>\n<li>If you want to gift more than one child, you\u2019ll need to divvy up your \u00a33,000 &#8211; let\u2019s hope there aren\u2019t any favourites \ud83e\udd1e<!-- \/wp:list-item --> <!-- wp:list-item --><\/li>\n<li>It\u2019s a per-person allowance, meaning households with more than one parent can gift \u00a33,000 each per year<\/li>\n<\/ul>\n\n                <\/div>\n            <\/div>\n        <\/div>\n\n        \n        \n        <div class=\"b-columns-mini__item m-yellow\">\n                                    \n            <div class=\"b-columns-mini__item-content\">\n                <div class=\"b-block-body\">\n                    <ul>\n<li>If you don\u2019t use your total annual gift allowance, you can carry it over to the following year, but this is a one-time-only kind of situation\u2026<!-- \/wp:list-item --> <!-- wp:list-item --><\/li>\n<li>This rollover means you could gift your child up to \u00a36,000 in one tax year \ud83c\udfb2<!-- \/wp:list-item --> <!-- wp:list-item --><\/li>\n<li>If you don\u2019t use your allowance in the second year, the tax-free allowance resets to \u00a33,000<\/li>\n<\/ul>\n\n                <\/div>\n            <\/div>\n        <\/div>\n\n        \n        \n    <\/div>\n<\/div> <!-- .b-columns-mini -->\n\n<div class=\"c-body\">\n\n\n\n\n<h2 class=\"wp-block-heading\">Less is more&#8230;? &nbsp;<\/h2>\n\n\n\n<p>In most cases, you can gift smaller sums of money, up to \u00a3250 a year, to as many people as you want.&nbsp;<\/p>\n\n\n\n<p>The catch? You can\u2019t combine this with your annual tax-free gift allowance.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Don\u2019t be a party pooper&nbsp;<\/h2>\n\n\n\n<p>Everyone likes to be treated once in a while and that doesn\u2019t change as children grow.\u00a0But, what does change is their employment status.<\/p>\n\n\n\n<p>If you\u2019re worried that gifting cash might push your children into a higher <a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/income-tax\/\">income tax <\/a>bracket, don\u2019t be, because HMRC doesn\u2019t count gifts as income.\u00a0Your children won\u2019t have to pay income tax on any money you gift them. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Get hitched quick \ud83d\udc8d<\/h2>\n\n\n\n<p>Did you know that there\u2019s an <a href=\"https:\/\/www.gov.uk\/inheritance-tax\/gifts\">allowance<\/a> if you\u2019re giving money to your child as a wedding gift? You can gift your children up to \u00a35,000 to make their day <em>extra <\/em>special.\u00a0And with beverages flowing at the reception, you might decide to combine this with your \u00a33,000 annual gift allowance, meaning you could gift up to \u00a38,000 tax-free! <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Cash me if you can<\/h2>\n\n\n\n<p>Was it HMRC that once said, <em>gift from the heart, not the head <\/em>?<em>&nbsp;<\/em><\/p>\n\n\n\n<p>Okay, maybe not \ud83e\udee3, but they did set a limit of \u00a3100 on the interest a child under 18 can earn tax-free on the money you gift them. The reason for this is to prevent parents from using their child\u2019s tax-free allowance to avoid income tax on their own personal income.<\/p>\n\n\n\n<p>But this limit doesn\u2019t apply to money gifted from grandparents, relatives or friends. Plus interest earned on savings in a Junior <a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/isa\/\">ISA<\/a> or <a href=\"https:\/\/www.gov.uk\/child-trust-funds\">Child Trust Fund<\/a> is also exempt from this limit!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Keep your receipts&nbsp;<\/h2>\n\n\n\n<p>If you\u2019re planning on gifting your child over \u00a33,000 without paying tax, you\u2019ll need to live more than seven years after they receive it &#8211; <em>no pressure<\/em> \ud83e\udee0<\/p>\n\n\n\n<p>But, if you pass within seven years of giving the gift, it may be subject to <a href=\"https:\/\/taxfix.com\/en-uk\/the-tax-basics\/inheritance-tax-rates-allowances\/\">Inheritance Tax<\/a>. The amount of tax charged depends on how long before your death the money was gifted.<\/p>\n\n\n\n<p>For this purpose, you should keep a record of the nature of the gift, who you gave it to, when you gave it, and how much it was worth \ud83d\udd8a\ufe0f<\/p>\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-highlight-mini m-neutral m-align-left\">\n    <div class=\"b-block-body\">\n        <p><b>Inheritance tax (IHT)<\/b><span style=\"font-weight: 400;\"> rates in the 2025\/26 tax year \ud83d\udc47<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Inheritance type<\/b><\/td>\n<td><b>Tax-free threshold<\/b><\/td>\n<td><b>Rate payable after threshold<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Standard<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u00a3325,000<\/span><\/td>\n<td><span style=\"font-weight: 400;\">40%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Children, grandchildren<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u00a3500,000<\/span><\/td>\n<td><span style=\"font-weight: 400;\">40%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Spouse, civil partner, charity<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No limit<\/span><\/td>\n<td><span style=\"font-weight: 400;\">0%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Charity donation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">10% or more of estate value\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">36%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Small gifts<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u00a33,000 per tax year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">40%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Agricultural property<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u00a31m*<\/span><\/td>\n<td><span style=\"font-weight: 400;\">20%<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">*there\u2019s also a 50% tax relief for farmers with land worth more than \u00a31m. <\/span><a href=\"https:\/\/www.gov.uk\/government\/news\/what-are-the-changes-to-agricultural-property-relief\"><span style=\"font-weight: 400;\">Check out HMRC<\/span><\/a><span style=\"font-weight: 400;\"> for more on this.\u00a0<\/span><\/p>\n\n    <\/div>\n<\/div> <!-- .b-highlight-mini -->\n\n<div class=\"c-body\">\n\n\n\n\n\n<h2 class=\"wp-block-heading\">Rate my gift&nbsp;<\/h2>\n\n\n\n<p>Your children will pay inheritance tax if you pass away within seven years of gifting them a sum of money over your personal allowance. Take a look at the below:\u00a0<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Years between gift and death<\/strong><\/td><td><strong>Tax rate&nbsp;<\/strong><\/td><\/tr><tr><td>Less than 3 years&nbsp;<\/td><td>40%<\/td><\/tr><tr><td>3 to 4 years&nbsp;<\/td><td>32%<\/td><\/tr><tr><td>4 to 5 years&nbsp;<\/td><td>24%<\/td><\/tr><tr><td>5 to 6 years&nbsp;<\/td><td>16%<\/td><\/tr><tr><td>6 to 7 years<\/td><td>8%<\/td><\/tr><tr><td>7 years or more&nbsp;<\/td><td>0%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Let\u2019s wrap it up<\/h2>\n\n\n\n<p>To gift money to your children tax efficiently, remember these three things:<\/p>\n\n\n\n<p>\u261d\ufe0f Don\u2019t gift over your yearly tax-free gift allowance of \u00a33,000\u00a0<\/p>\n\n\n\n<p>\u270c\ufe0f Make the most of wedding allowances, roll-overs and other tax-free occasions<\/p>\n\n\n\n<p>\ud83e\udd1f If you gift sooner rather than later, you won\u2019t be subject to high IHT rates<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you understand it, tax efficiency is the gift that keeps giving. But let\u2019s be honest, most people don\u2019t understand it, and it breaks our hearts \ud83d\udc94 But in the spirit of Christmas, we\u2019re giving you the ultimate guide to gifting money to children tax-efficiently. Thank us later! The parameters of your present&nbsp; Let\u2019s start [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[458,462],"tags":[102,348,415],"class_list":["post-30083","post","type-post","status-publish","format-standard","hentry","category-investor-capital-gains-tax-returns","category-tax-efficiency","tag-hmrc","tag-income-tax","tag-tax-return-basics"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Gifting money to children tax-efficiently &#8211; Taxfix<\/title>\n<meta name=\"description\" content=\"We\u2019re giving you the ultimate guide to gifting money to children tax-efficiently. 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