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Christmas is the perfect time of year to give family members a cash gift, but generous givers should be aware that some cash gifts are potentially taxable. To help make the tax surrounding cash gifts easier to understand, we’ve looked at what tax needs to be paid when giving different amounts to a child or grandchild this Christmas.
How much tax do you have to pay on cash gifts?
Each year, everyone gets an annual gifting limit of £3,000 that is exempt from inheritance tax (IHT). This means that those with three grandchildren can give up to £1,000 each and still remain within the gifting limit, but if £3,000 were given to each grandchild this would go over the limit. An exemption to this is if the gifting limit was not reached the previous tax year, in which case the unused amount can be passed on to this year. For example, if a grandparent did not gift any money last year and then gifting £3,000 to two grandchildren this year, they would still be within the limit.
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