by Asim Abbas
11 November 2026 
Gifting money to children: tax rules for parents and grandparents
Gifting money to children: tax rules for parents and grandparents
Giving money to children or grandchildren is one of the simplest ways to help family and reduce a future Inheritance Tax bill.
- Annual gift exemption of £3,000
- Interest over £100 from a parent’s gift is taxed on the parent
- Junior ISAs are exempt from that rule
- Larger gifts are free of IHT after seven years
But there are rules on how gifts are treated, and a special Income Tax rule for money parents give to their own children.
This guide explains the key allowances and the most tax-efficient ways to give.
Inheritance Tax exemptions
- Annual exemption: £3,000 a year, plus any unused amount from the previous year
- Small gifts: up to £250 per person a year, to as many people as you like
- Wedding gifts: £5,000 from parents, £2,500 from grandparents
- Gifts from surplus income: regular gifts that don’t reduce your standard of living
- Potentially exempt transfers: outside your estate after seven years
Free tax calculators
Explore your family’s tax.
The £100 parental rule
If a parent gives money to their child under 18 and it earns more than £100 a year in income, the whole of that income is taxed as the parent’s. This stops parents using children’s allowances. It doesn’t apply to gifts from grandparents or other relatives.
Two parents each give their son £3,000 in a savings account paying 4%, £240 a year interest in total. Each parent’s gift earns £120, over £100, so each is taxed on their £120. If grandparents had given the money instead, the interest would be covered by the child’s own allowances.
Junior ISAs and pensions
- Junior ISA: up to £9,000 a year, all growth tax-free, exempt from the £100 rule
- Child pension: £2,880 a year net, topped up to £3,600 with tax relief
- Premium Bonds: prizes are tax-free
Fixed-fee accountancy support
Transparent monthly packages for sole traders, landlords and limited companies. Fixed fees agreed upfront, VAT included.
Get a fixed-fee quoteCall 0161 531 4179Larger gifts
Gifts above the exemptions are potentially exempt transfers. If you die within seven years, they may be taxed, with taper relief reducing the tax after three years. Keep a record of gifts and dates for your executors.
Helping with a house deposit
A gift towards a deposit is a potentially exempt transfer. Lenders usually want a gifted deposit letter confirming it’s not a loan. If you’re gifting a property itself, CGT may apply on any gain.
Gifts into trust
Bare trusts are often used for grandchildren. Discretionary trusts give more control but can have immediate IHT charges above the nil rate band and their own tax returns. See our trust tax returns service.
See HMRC’s guide to gifts and Inheritance Tax, our IHT 2026 guide and our inheritance tax planning service.
What should I do next?
Each year.
Junior ISA for parents.
For executors.
Frequently Asked Questions
How much can I gift tax-free each year?
£3,000 under the annual exemption, plus small gifts and gifts from surplus income.
What is the £100 rule?
Income over £100 from a parent’s gift to a minor child is taxed on the parent.
Does the £100 rule apply to grandparents?
No. It only applies to parents.
How much can go into a Junior ISA?
£9,000 a year.
What happens if I die within seven years of a gift?
The gift may be taxable, with taper relief after three years.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Stephen Reynold
I’m Stephen Reynold, an accountant at Wingate Accountants. I work with sole traders and small companies, turning tax rules into clear, practical next steps.
