Smart Ways to Gift Your Wealth This Christmas

Christmas is a season of giving, and for many people, their values centre around family. Financial gifts can be a meaningful reflection of this, whether it’s helping a child onto the property ladder, contributing to grandchildren’s education, or simply spreading festive cheer. Understanding the tax rules can make your generosity even more impactful.

Giving Money Without Tax Surprises

Here are the key considerations to keep your gifts tax-efficient:

• Annual Gift Allowance: Each tax year, you can give up to £3,000 without it affecting inheritance tax (IHT). If you haven’t used last year’s allowance, you can carry it forward, allowing for a combined £6,000 this year.
• Small Gifts Exemption: You can give up to £250 to as many individuals as you like without IHT consequences, as long as they don’t also benefit from your £3,000 annual exemption.
• Regular Gifts from Income: If you have income exceeding your living costs, regular financial gifts can be made free of IHT, provided they don’t impact your standard of living and are well-documented. There are some technicalities around this, so it’s well worth getting good advice if it’s something you’re considering.
• The Seven-Year Rule: Larger gifts that don’t fall within these exemptions could be subject to IHT if you pass away within seven years. However, taper relief can reduce the tax owed after three years.

A Festive Example: The Johnson Family

Picture Jane and Peter, doting grandparents who want to make Christmas extra special this year. They plan to:

1. Use their combined annual gift allowance of £6,000 to give their granddaughter Sophie a head start on her university tuition.
2. Start a tradition of gifting their grandchildren £200 each year from their surplus income, ensuring it’s tax-efficient and sustainable.

By understanding and applying the rules, Jane and Peter make meaningful contributions to their family while avoiding unnecessary tax complications.

Values-Based Giving: Aligning with What Matters Most

Values-based financial planning ensures your generosity aligns with your long-term goals and what’s most important to you. Whether it’s creating opportunities for loved ones or supporting their financial security, thoughtful planning makes a lasting impact.

When planning financial gifts, ask yourself:

• Can I afford it? Ensure your own financial stability and future plans are secure before gifting.
• Am I maximising allowances? Taking full advantage of exemptions can make a significant difference.
• Would professional advice help? A financial planner can help you navigate the rules and structure gifts effectively.

Supporting Your Community Through Charitable Donations

Christmas is a time when we exchange gifts, eat and drink well, and enjoy time with our families. But it’s also a time when we reflect on those people who are suffering and unable to enjoy Christmas in the same way. Whether it’s as a result of bad luck, illness, disability, natural disaster or man-made crisis.

Giving to charity is not only a great way to support your community, but to make full use of your financial acumen. Charitable gifts can attract Gift Aid tax relief, enabling the recipient to receive a sizeable boost in the value of your donation, and if you’re a higher-rate taxpayer, also saving you tax at the same time.

Charitable gifts are also very efficient for saving Inheritance tax, with no tax to pay on your donations. You can also give away assets that are subject to capital gains tax in your hands, but on which the charity can avoid paying the tax when it encashes them.

If you aren’t sure which charity to support, you might want to consider making a donation to our very own Chesterton House Foundation. We’ll make sure that your funds are used to help deserving local charities, and you can find out more on a Foundation webpage.

How We Can Help

At Chesterton House, we’re here to make the process of gifting as seamless as possible. Whether you’re thinking of one-off contributions or a structured plan, our expert Financial Planners are here to guide you through the options, ensuring your generosity benefits both you and your loved ones.

If you’re already a client, why not discuss gifting with your Planner at your next Progress Meeting? If you’re not yet a client, contact us today to arrange your free initial consultation with one of our Planning team.

We’re here to help you make the most of your generosity and help you to live a great life.