How Much Money Can a Grandparent Give a Grandchild in the UK?
Many grandparents love the idea of helping their grandchildren financially — whether that’s putting money towards a first car, university fees, or helping with a house deposit. But before writing a big cheque, it’s important to understand the tax rules around gifting money.
Giving too much, too quickly, could have implications for inheritance tax (IHT) later on. Inheritance tax is up to 40% tax on the value of someone’s estate when they pass away.
By planning ahead, grandparents can make the most of HMRC gifting allowances and reliefs to avoid a large tax bill while giving generously to their grandchildren.
There is no limit on the amount that grandparents can gift, however, large gifts may be counted as part of your estate if you die within seven years, triggering inheritance tax.
Tax-free gifting allowances grandparents can use
1. The annual £3,000 exemption
Every individual in the UK can give away up to £3,000 each tax year without it being added to the value of their estate. This is called the annual exemption. It is £3,000 in total not per person. If you did not use your allowance last tax year then you can carry it forward for one year.
2. Small gifts of up to £250
In addition to the £3,000 annual exemption, you can give as many small gifts of up to £250 per person per year as you like, provided you haven’t used another allowance for that same person.
3. Gifts from surplus income
If you are receiving more income than you need to live on (for example from pensions), you can give away any amount regularly from surplus income, completely free of inheritance tax.
The only requirements is that the gifts must be from excess income, not impact your standard of living and must be regular. It is important to keep records of all the gifts.
At Borealis Financial Planning, we can help you to set up an Excess Income Plan which takes advantage of this allowance and creates a fund into trust which is outside of your estate for your nominated beneficiaries.
Book a no-obligation meeting now to find out more
4. Wedding gifts
Grandparents can also give a grandchild up to £2,500 as a wedding gift, tax-free.
5. Larger gifts: the 7-year rule
If you want to give your grandchildren a larger lump sum – for example to pay for a house deposit then you can do this but it will be classed as a Potentially Exempt Transfers (PETs). This means that if you live for 7 years after making the gift, it falls outside your estate for inheritance tax. If you die within 7 years, it may use up part of your £325,000 nil rate band, or be taxed. There is also “taper relief” on gifts made between 3 and 7 years before death, which may reduce the tax owed.
Make the most of your tax reliefs and allowances to give more to your grandchildren
Book a no-obligation meeting to find out how to gift to your grandchildren tax-efficiently
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Trusts are not regulated by the Financial Conduct Authority.
SJP Approved 01/09/2025