How much you choose to gift to your children is entirely up to you. However, if you want to guarantee that your gift is tax-free, it will need to be covered by your £3,000 annual exemption. Of course, that doesn’t mean you can’t give them more than this – you simply need to be mindful of the timing.
If you give your children more than £3,000 in any one tax year, you’ll need to live for more than seven years after making your gift to avoid it being included in the value of your estate (and therefore potentially liable to inheritance tax). This is known as a potentially exempt transfer, or PET. If you die within seven years of making the gift, it may be subject to inheritance tax. The amount of tax charged depends on when the gift was made (see table below).
If you do intend to give a gift to your children, you’ll need to keep a record of the nature of the gift, who you gave it to, when you gave it and how much it was worth.
It’s also important to remember that even if your gift is exempt from inheritance tax, any income or gains arising from it could have other tax implications for your children, for example, capital gains tax.
