Gifting money to children explained

Gifting money to your children can give them a financial head start. However, there are tax implications and rules to be aware of. On this page, we answer key questions such as, “how much can I gift to my children?”, and explain when inheritance tax may be due on large gifts. We also summarise key considerations when making cash gifts to children.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

You can gift as much money as you want to your children in theory, but large gifts may be subject to tax. For the 2025/26 tax year , every UK citizen has an annual tax-free gift allowance of £3,000. This enables you to give money to your children in lump sums without worrying about inheritance tax (IHT).

It’s important to note that this annual exemption is your total allowance for a given tax year, which means you could give all £3,000 to one child, or split it between several children.. Note that this is a per person allowance, so both parents may gift £3,000 each per year tax-free.

If you don’t use your total annual gift allowance, you can carry it over to the following year -  although you can only do this once. If you don’t use your allowance (plus any remaining allowance) in the second year, the tax-free allowance resets to £3,000 at the end of that time.

You’re also allowed to gift smaller sums of money, up to £250 a year, to as many people as you want without them being subject to inheritance tax. However, you can’t use both the small gift exemption and your £3,000  annual tax-free gift allowance for the same recipient. Doing so may mean you’re taxed on any gifts over £3,000.

There’s a separate allowance if you’re giving money to your child as a wedding gift. As a parent, you can give your child a cash gift of up to £5,000 when they get married. If you choose, you can combine this with your £3,000 annual gift allowance (if you haven’t already used it), meaning you could give up to £8,000 tax-free.

Grandparents can give their grandchildren up to £2,500 as a wedding present, while other family members or friends can give up to £1,000 tax-free. Setting aside funds to earn competitive interest can help your money grow steadily so it’s ready to be given as a gift when the big day arrives.

Yes, you can gift money to children under the age of 18, although it’s important to be aware of certain rules. There’s a limit of £100 on the amount of interest a child can earn tax-free on the money you gift them. This limit is designed to prevent parents from using their child’s tax-free allowance to avoid income tax on their personal income when they file a tax return.

Anything your child receives above £100 will be subject to tax. However, this limit doesn’t apply to money given by grandparents, other relatives, or friends. Interest earned on savings in a Junior ISA or Child Trust Fund is also exempt from this limit.

If you’re considering giving money to older children, you may ask yourself the question, “if I gift money to my children, might it affect the income tax they have to pay and push them up into a higher tax band?” HMRC doesn’t count gifts as income, which means your children are not liable to income tax on financial gifts you give them.

If you give your child a monetary gift over £3,000, the extra amount is treated as a potentially exempt transfer (PET). No inheritance tax will be due if you live for seven years after making this kind of gift.

If you were to pass away within seven years of gifting money to your children, inheritance tax might apply if the total amount you gifted in that period exceeds the IHT threshold of £325,000.. As you can see in the table below, the rate of tax due reduces gradually in a sliding scale over the seven years, known as taper relief.

If you live seven years or more after giving a larger gift, there will be no tax to pay. This rule applies to any gift you give anyone. However, even if it is exempt from inheritance tax, any income or gains arising from it could have other tax implications for your children. Gains on non-cash gifts such as property, for example, may be subject to capital gains tax.

While you can give your son or daughter a cash gift of £20,000 (or more), there may be tax implications. That’s because any money you give that exceeds your £3,000 tax-free gift allowance will be added to the value of your estate and may be subject to inheritance tax when you die.

If you want to give your child a £20,000 cash gift without them having to pay tax, you’ll need to live for more than seven years after making your gift. If you die within seven years of making the gift, it may be subject to inheritance tax. The amount of tax charged depends on how long before your death the gift was made.

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.  Keeping the money you plan to give in a separate account can help, as you’ll receive account statements for your records.

Paul gives:

• £325,000 to his daughter in 2020
• £100,000 to his son in 2021

Paul passed away in 2025, just over four years after making the most recent gift. 

Because the £325,000 IHT threshold has been reached with the first gift, the second gift of £100,000 is subject to inheritance tax. Taper relief means his son will have to pay inheritance tax at 24% = £24,000.

If you’re still working, you can give your children small, regular sums from your income without incurring tax. This is known as the surplus income exemption. If you do this, it’s important that the payments come directly from your income, rather than your savings, and the rules state that these regular payments must not have an impact on your standard of living.

Alternatively, you could consider saving a small amount each month in an accessible savings account to earn interest, and then gift your children the total amount as a lump sum at the end of each year.

Whether your child wants to get on the housing ladder or is heading off to university, a cash gift can go a long way. If you’re in the planning stages, a savings account can house your funds securely before your child may need the money. Taxpayers can earn up to £1,000 in interest on their savings tax-free under the personal savings allowance.

At Raisin UK, you can choose from a variety of competitive fixed rate bonds, notice accounts, and easy access savings accounts. All our partner banks are covered by the Financial Services Compensation Scheme (FSCS), protecting up to £85,000 per person, per bank. 

It’s easy to get started. Simply register for a Raisin UK Account through the website or via our app, and apply today. Opening an account with Raisin UK is free and offers competitive interest rates from a range of UK banks.

If you have any questions or need support, our customer services team is ready to help.

Phone: 0161 388 2399 (8:30 am to 4:30 pm Monday to Friday)

Email: help@raisin.com

How much does the Tooth Fairy spend every year? Raisin UK uncovers the costs.

It’s often one of our first experiences with money, and probably one of the most magical. You go through the pain of losing your first tooth, pop it under your pillow when you go to sleep, and the next day you discover that the Tooth Fairy has come and swapped your tooth for a shiny coin.

Whilst we don’t know where Tooth Fairies get their seemingly bottomless pot of funds from, the financial experts at Raisin UK have worked out the exact size of the global Tooth Fairy fortune, including why explaining gifting to your children before they become adults is a good idea.

UK kids today appear to be making a pretty penny for each tooth as the national average the Tooth Fairy is dishing out is £3.42 – and with children expected to lose all their 20 baby teeth by the time they’re 12-14, this means there’s an extra £68.40 to be made alongside pocket money!

However, this figure isn’t universal and varies across the UK. According to research by Stem Protect, Children in Bradford receive £0.50 per tooth on average, whereas the Tooth Fairy grants a whopping £2.50 per tooth for children in Harrogate.

Ultimately, if each child in the UK lost only one tooth per year, the Tooth Fairy fortune would have to amass to a staggering £40.9 million to cover the money left under pillows, or £818.1 million a year if each child lost all their milk teeth!

Across the pond, It seems the funds for US tooth fairies have increased even more than in the UK. On average, US children are receiving $4.70 per tooth – that’s just under $100 ($94) for their full set of baby teeth!

However, not all children in America are getting this generous handout from Tooth Fairies. Children in the Midwest receive the least on average at $3.71 per tooth, whereas Tooth Fairies in the Northeast of the USA are splashing out $4.35 a tooth!

Children under the age of 14 currently make up around 21.4% of the US population (around 60.2 million). If each child lost one tooth a year, the Tooth Fairies’ bill would be a whopping $283.1 million a year! If every child lost only half their baby teeth, the Tooth Fairies would need $2.8 billion to keep up with America’s dental demands.

In reality, the disparity between countries and towns shows that numerous factors come into play when gifting cash for your children’s teeth as the Tooth Fairy.

The disparity in cost per tooth is clear when looking at research from Stem Protect. In areas of relatively high socioeconomic wealth such as Harrogate, children are earning more per tooth.

In Ireland and Spain, however, the Tooth Fairy is paying out €3.90 (£3.36) per tooth, which calculates to €78.00 (£67) per mouth, the Spanish Tooth Fairy gives £464,104,913.90 away each year, and the Japanese Tooth Fairy spends £1,016,585,320.21 per year.

The Tooth Fairy has different rates everywhere. Whether it’s because of how far they have to travel, the rate varies across the UK. Tooth Fairies also pay less for unclean bedrooms, not going to bed on time, and not eating vegetables. If you can, try and let the fairies know they are due, so they have time to write a note in the diary, drop off your money with plenty of notice, and dip into their savings in time.

If you’re determined to grow your money into the kind of fortune that Tooth Fairies have, why not start by growing your savings? At Raisin UK, our marketplace is home to savings accounts that might be a good way to set money aside.