Tax Q&As: Giving cash gifts to our grandchildren

Our granddaughter is off to University and we would like to make a financial contribution. The total value of our joint estate is approximately £1 million, comprising our home £550k, cash and investments £300k and a house we rent out valued at £150k.

Q. Can we just give our granddaughter a lump sum of £10,000?

A. You can give any cash gift but this cash will still form part of your estate for inheritance purposes unless you live for more than 7 years after the gift.

Q. Could we give her the net rental income we receive each month as we don't need this cash to live on?

A. Unless you gave the property to her, you would still be paying income tax on the rental income. However, if you can show that this was ‘excess income’ (i.e. income over and above your expenditure) and you continue to make the payment year on year, the gifts would not be considered to still form part of your estate and the 7 year rule above would not apply. If you are going to do this, we would recommended that you keep a record.

However, from a tax perspective view it would be more efficient to transfer the property to a Trust. An election (claim) can be made so that you do not pay any capital gains tax on the transfer to the Trust as a gift. The Trust will have to pay tax on the income at 45% but then your granddaughter can reclaim this tax back.

Q. But we won’t be able to match this gift for our other grandchildren.

A. Trusts are flexible and can be drawn up so that all your grandchildren, current and future, can benefit from the income and you can both be Trustees so you have a say in who gets what and when.

If you would like further advice on giving cash gifts or setting up a trust contact Hallidays on 0161 476 8276 or email

Reviewed 12th December 2018


The information contained herein is of a general nature and is not intended to be received as formal professional advice. Whilst we endeavour to provide accurate information, there can be no guarantee that the information is accurate as of the date it is received, or that it will continue to be accurate in the future, due to legislative changes. It is therefore important that before you act upon any information contained herein you seek appropriate professional advice to take account of your exact circumstances.

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