Inheritance Tax / Financial planning

Giving the gift of financial freedom

With Christmas drawing near it’s a perfect time to consider a financial gift, which can deliver both a lasting present and a sensible tax planning opportunity. Peter Webb, our Head of Tax Advisory, shares some useful options if you’re considering making a financial gift this season:

Gifts for children and grandchildren

  • A Junior ISA offers an opportunity to save on behalf of your child or grandchild, and can help encourage good saving habits from an early age. You can contribute up to £9,000 free from Income Tax and Capital Gains Tax this year, more than double last year’s allowance. Helpfully a Junior ISA will automatically convert into a standard ISA when the child reaches the age of 18.
  • Surprisingly you can also start a pension, or Junior SIPP, for a young child, contributing up to £2,880 every tax year. With tax relief this contribution grows to a very attractive £3,600. And it’s worth thinking about how this translates over the long-term; in fact, maintaining this level of pension contribution of £3,600 every year for 18 years can grow the pension pot to more than £1 million at retirement based on a net return of 6% per annum.
  • For older children, a Lifetime ISA can be held by anyone aged 18 to 40. It allows savings of up to £4,000 every tax year with a 25% Government top up.
  • Premium Bonds can be bought for those under the age of 16 by parents, legal guardians, grandparents and great-grandparents. The minimum investment is £25 and a parent or legal guardian does need to look after the Bonds until the child reaches 16.

Find out more

Find out more about Inheritance Tax and how you can plan ahead in our free downloadable guide.

IHT guide

Inheritance Tax friendly gifts

Every year you have an allowance which can be used free from the threat of Inheritance Tax. These include:

  • An unlimited amount to your spouse or civil partner
  • Up to £3,000 per individual – allowing you and your spouse to gift up to £6,000 to your children or up to £12,000 if you didn’t use your allowance last year
  • Small gifts of up to £250
  • Marriage gifts made before a wedding, as long as the marriage then takes place, of up to £5,000 for your child, £2,500 for your grandchild or £1,000 to anyone else
  • Regular, recorded gifts made out of your spare income

If you are considering making sizeable or regular financial gifts or want to discuss any aspect of your Inheritance Tax planning, please contact your nearest office.