How Much Can I Gift My Children?

Mariam Abu HusseinLegal Assessment Specialist @ Lawhive
Updated on 29th January 2024

Many parents wish to provide financial support to their children, but they often face confusion and uncertainty about the legal and financial implications of gifting money.


The fear of unintentionally incurring inheritance tax and making wrong financial decisions can be daunting.

In this article, we answer the question surrounding gifting to your children.

You will also learn:

  • The rules and regulations governing financial gifts to your children;

  • The ins and outs of gifting and the various allowances and exemptions available;

  • How to reduce potential inheritance tax liabilities;

  • Practical tips and strategies for making the most of your financial gifts.

How Much Money Can You Gift Your Children?

Good news! There are ways to give money to your children without worrying about taxes.

These include:

  • Gift Allowance: Every tax year, you can gift a certain amount of money to your children without incurring inheritance tax. It's called the annual gift allowance and for the current tax year, it's £3,000.

  • Small Cash Gifts: Besides the yearly gift allowance, you can give cash gifts of up to £250 to as many people as you want. So, you can send birthday or holiday gifts to your children or grandchildren without worrying about taxes.

  • Large Gifts: For more significant gifts that exceed the annual allowance, some rules and exemptions can help you avoid inheritance tax or minimise it considerably. These may include wedding gifts, gifts for regular support, or other specific circumstances.

Knowing gifting limits and exemptions is crucial for maximising your generosity and providing financial support to your children without unnecessary taxes. 

Is money gifted to children subject to income tax?

No, money gifted to children is usually not subject to income tax. It's not treated as income, so recipients don't need to pay income tax on it.

It's important to note that this rule applies to gifts, not other financial support like regular payments for services or work. If the gifted money generates income (e.g., interest from savings), the income itself may be taxable, but not the original gift.

Inheritance tax may apply if the gift giver passes away within seven years of making the gift and if the total value of their estate, including the gift, exceeds the inheritance tax threshold. In these cases, the gift might be considered part of the giver's estate for tax purposes.

Inheritance Tax Law and Gifts

Inheritance Tax (IHT) may apply to gifts made by an individual during their lifetime, especially if they pass away within seven years of making the gift.

However, certain rules and considerations can affect the amount of IHT payable on such gifts like:

  • Taper Relief: Taper relief is a mechanism that reduces the amount of Inheritance Tax payable on gifts as time passes. It works on a sliding scale, with the full tax rate applying if the gift giver passes away within three years of making the gift. The tax rate decreases progressively after this period.

  • Other Assets, Including Property: Inheritance Tax can also apply to non-cash gifts, like property. The asset's value at the time of the gift determines the potential tax liability.

To understand gifting for IHT purposes, note that it involves transferring assets or money to someone without receiving something of equal value in return. This applies to gifts to children, family members, friends, or other beneficiaries.

Seeking professional advice or consulting HM Revenue and Customs (HMRC) is advisable if you have concerns about potential IHT liability on gifts.

Gifts and capital gains tax

This tax surfaces when you sell or transfer an asset that has appreciated (gone up in value) since you obtained it.

Gifts and CGT interact in the following ways:

Annual exempt amount

There is an annual exempt amount for Capital Gains Tax (CGT). For the 2022/2023 tax year, this threshold is £12,300. If the gain from your gift is below this limit, you won't be subject to CGT.

Gifting assets

When you gift assets like property or shares to your children, it's a Capital Gains Tax disposal. The gain or loss is determined by the asset's market value, not its original purchase price.

Market value

Determining the market value of the gifted asset is crucial in evaluating potential Capital Gains Tax. This value represents the asset's open-market worth, which may differ from its purchase price.

Transfers between spouses or civil partners

Gifts and transfers between spouses or civil partners are often CGT-exempt. This means assets can be transferred without incurring CGT, and recipients inherit the exact 'base cost' as donors.

Principal private residence relief

When gifting your primary residence to your children, it might qualify for Principal Private Residence Relief, an exemption from Capital Gains Tax. However, specific conditions must be met for this relief, and it may not apply if the property isn't your main residence.

Alternatives to gifting money to children 

When financially supporting your children, you can consider alternatives to gifting money.

Trusts are a powerful tool for securing their future, and they include: 

Family Trusts

A family trust is a legal arrangement where assets or money are transferred to appointed trustees who manage them for the benefit of your children. It provides protection and allows you to specify how and when the assets are distributed.

Education Trusts

To fund your children's education, consider an education trust. These trusts cover educational expenses, providing the financial support your children need for higher education.

Discretionary Trusts

A discretionary trust provides flexibility by allowing trustees to distribute the trust's income and capital to beneficiaries, such as your children. It is beneficial for long-term financial planning.

Property Trusts

Property trusts transfer real estate to ensure your children benefit from its value or generated income, securing their housing needs strategically.

Trusts play a vital role in inheritance tax planning. Using specific trust structures can help reduce tax liability and ensure more wealth transfers to children.

Seeking legal advice from an expert solicitor on inheritance tax is highly recommended to ensure you choose the right trust structure and navigate the legal requirements effectively. 

Can you gift money to children under 18 

Yes, you can gift money to children under 18 in the UK. There are no legal restrictions on gifting money to your children, regardless of their age.

However, there are specific rules and considerations to keep in mind:

Gift allowance: Each tax year, you can gift up to £3,000 to your children without incurring any inheritance tax (IHT). This is known as the annual gift allowance.

Small cash gifts: Besides the annual gift allowance, you can give cash gifts of up to £250 to as many individuals as you want, including your children. These gifts are exempt from IHT..

Large gifts: For larger gifts, IHT may apply if you pass away within seven years. This is called the "seven-year rule." The IHT rate decreases as you survive longer after the gift.

Parental responsibility: Keep in mind that as a parent, you have a legal duty to provide for your children's needs (parental responsibility). Gifting money should not compromise their well-being.

Considerations for minors: When gifting money to children under 18, it's advisable to set up a trust or a designated savings account to manage and protect the funds until they reach the age of majority.

Knowing the IHT rules and exemptions is vital. They can affect the tax implications of gifting money to your children.

Seek advice from a financial adviser or tax professional to understand tax efficiency and safeguard their financial future.

Considerations for gifting money to children

When gifting money to your children, there are some important considerations to keep in mind to ensure you are gifting for the right reasons for both you and them.

You should always consider the recipient's age and financial maturity to ensure they can manage the gift responsibly. After all, there would be nothing worse than gifting a larger sum of money to find that they haven't spent it sensibly.

For this reason, consider how the gift could support your child's education or help them enter the property market, rather than just giving them money to use as they wish.

Remember, if you are fortunate enough to gift to multiple children, aim for fairness and transparency to avoid family conflicts. The last thing you need are arguments over something that is supposed to bring happiness and help.

Always be aware of potential tax implications for both you and your children when making larger gifts and make sure that the gift won't affect any government benefits or assistance your child may be receiving.

But before any of the above, make sure you assess your own financial security and future needs before making substantial gifts. Should you be aware of a time when you might need it in the coming years, reconsider or reassess the amount.

For financial and legal aspects of substantial gifting, seek professional advice. They can guide you on using a deed of gift to formalise asset transfers.

Seek help with gifting to your children

We understand that navigating the intricacies of gifting money to your children while considering the implications of inheritance tax can be a complex task. 

However, by understanding the limits and tax exemptions, seeking professional guidance, and keeping essential considerations in mind, you can ensure that your gifts are both meaningful and financially responsible.

If you need help with money, tax, and debt matters relating to inheritance law or gifting money to children and family members, the team at Lawhive are here to help at affordable fixed-fee prices.

For expert help, get in touch with us today using our online form.

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