Can I give money to my children without tax?

Yes. Several kinds of gift are exempt immediately, including regular gifts out of surplus income, which has no upper limit. Anything else leaves your estate provided you survive seven years.

The immediate exemptions

£3,000 a year
Your annual exemption, usable as one gift or several. Carry an unused one forward a single year and no further.
£250 per person
To as many different people as you like, but not to anyone who has already received part of your annual exemption.
Wedding gifts
£5,000 to a child, £2,500 to a grandchild or great-grandchild, £1,000 to anyone else. The gift has to be made before the wedding.
Regular gifts out of income
No upper limit. The gift has to form part of your normal expenditure, come out of income and not capital, and leave you able to maintain your usual standard of living. This is the most valuable exemption and the least used.
Maintenance
Payments supporting a child under 18 or in full-time education are not gifts for these purposes at all.

Everything else, and the clock

A gift that is not covered by an exemption is a potentially exempt transfer. Nothing is payable when you make it. If you live seven years it leaves your estate completely.

If you die within seven years it comes back into the calculation and uses your nil rate band before the rest of your estate does. Taper relief can reduce the tax on the gift, but only where the gift itself is larger than the nil rate band, because otherwise there is no tax on it to reduce.

Regular gifts out of surplus income have no upper limit. It is the most valuable exemption and the least used.

Related questions

Can my spouse and I both use the £3,000?

Yes. It is per person, so a couple can give £6,000 a year between them, and £12,000 in a year where neither used the previous year's.

What counts as surplus income?

Income you did not need for your usual standard of living. Pension income, dividends, interest and rent all count. It has to be income and not capital, and the gifts need a pattern, so a single payment is harder to justify than a standing order.

How do I prove the gifts came out of income?

Keep a simple record of your income, your normal expenditure and the gifts made each year. Your executors have to make the case after you are gone, and without records it is difficult.

Can I give my children a deposit for a house?

Yes. It is a potentially exempt transfer unless it fits an exemption, so it leaves your estate after seven years. A lender will usually want confirmation the money is a gift and not a loan.

Where this fits

The first question is not how much you may give away. It is how much you can afford to, and that is arithmetic we can do with you.

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The advisers for this subject

Sunny Bharj

Sunny Bharj

Independent Financial Adviser

Tony Springer

Tony Springer

Independent Financial Adviser

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