Now that Christmas is almost upon us, it’s likely that you’re beginning to think about the gifts you’d like to give to your loved ones. 

If you’re planning to offer a substantial amount of money as a present this year, either to a young family member or an adult, you could be feeling excited about the difference this money could make to their lives. 

But before you bestow a financial gift, it’s essential to learn how you can make these tax-efficiently, in order to help avoid an increased tax burden for either you or the recipient of the gift. 

Keep reading to learn about two tax-efficient options for giving financial gifts this Christmas. 

1. Make savings on behalf of your child or grandchild

You may be accustomed to putting cash in an envelope for the children in your family at Christmas. But if you are looking to offer an under-18 loved one a more substantial financial gift this year, paying into a savings account or pension on their behalf could be the ideal way to transfer wealth tax-efficiently. Here are two possible routes to consider.

Starting a Junior Individual Savings Account for your child or grandchild

Starting a Junior Individual Savings Account (JISA) could be the ideal way to offer wealth to the next generation while potentially reducing their tax burden later. 

As of the 2025/26 tax year, JISAs:

• Can receive a maximum deposit of £9,000 a year
• Are “tax wrappers”, meaning any gains made are usually free from Income Tax and Capital Gains Tax (CGT)
• Can be controlled by your child when they reach 16, but the funds can only be accessed once they reach adulthood.

Setting a child up with a pot of money they can access later may be life-changing for them. They could use it to help fund a university course, spend it on an unforgettable travel experience, or simply keep it saved up for when they need it later.

Paying into a pension on a child’s behalf

Alternatively, you could pay into a pension on behalf of your child. Although they may not fully appreciate this financial gift now, the compound returns this account might receive over the decades to come could be substantial.

Indeed, Investors’ Chronicle reports that “£300 a month invested between a child’s birth and age 18, assuming 20% basic-rate tax relief on contributions, investment growth of 5%, and charges of 1%, would grow to £581,240 by the time they reach 65”.

Even if you only make a single one-off payment into a Junior self-invested personal pension (SIPP) or a similar account this Christmas, this money is likely to grow over the course of their life.

As of the 2025/26 tax year, you can pay up to £2,880 net (£3,600 gross) into a pension fund for a child or grandchild under 18 while benefiting from tax relief. If the child receives earnings, you can pay tax-relievable contributions of up to £60,000 a year, or 100% of the child’s earnings, whichever is lower.

Ultimately, this type of gift may not replace the money-in-the-envelope tradition that is typically adhered to at Christmas, but if you’re looking to give a little extra to the young people in your life, these two options could be a great place to start.

2. Offer financial gifts that remain within your annual exemption

If you have adult children and wish to simply transfer them a sum of money as a financial gift this Christmas, it’s important to keep your annual exemption in mind. This could help your beneficiaries to pay a lower Inheritance Tax (IHT) bill later on.

Your annual exemption is the amount you can give away tax-efficiently each year, and as of the 2025/26 tax year, it stands at £3,000. If you wanted to give money to more than one person this Christmas, you can split your annual exemption among as many recipients as you like.

Crucially, if you give more than £3,000 away in one tax year (or £6,000 between yourself and your spouse or partner), and you were to pass away fewer than seven years after the transfer was made, the amount in excess of the annual exemption could still make up part of your estate for IHT purposes. 

In other words, gifts above £3,000 are not necessarily tax-efficient in all cases, but if you keep financial offerings within the annual exemption, this gift is unlikely to affect your or your child’s tax bill. 

Plus, while giving a large sum as a one-off can be life-changing for the recipient, this Christmas could be a great opportunity to begin “giving while living”. If you know that you can afford to support yourself comfortably for the rest of your life, it could be wise to begin reducing the value of your estate now, in order to reduce the amount of IHT your loved ones could pay later on.

Get in touch

If you’d like to learn more about saving on behalf of a child, giving while living, or the annual exemption, get in touch.

Email me at a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. 

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.