HMRC warning issued to grandparents gifting grandchildren money for Christmas

Inheritance tax rules have been explained as grandparents rush to gift grandchildren money this Christmas to avoid Labour Party government and Chancellor Rachel Reeves' tax grab. It comes as as families face tighter inheritance tax rules from HMRC in the coming years.

Ian Dyall, Head of Estate Planning at Evelyn Partners said: "Helping out loved ones and seeing them enjoy greater financial security can bring a lot of joy and satisfaction to all concerned, at any time of year. Sharing wealth and supporting relatives financially has become more of a priority as demands have mounted on the budgets of students, young families and even middle-aged adult children.

"Another reason financial gifts could be top of the list for some families this Christmas, and in the coming years, is that older savers are looking to pass on more wealth before they die." Families looking to make financial gifts this Christmas can take advantage of several tax-free allowances.

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Individuals can give away up to £3,000 per tax year - or £6,000 for couples - without inheritance tax implications. Unused allowance from the previous tax year can be carried forward, potentially allowing gifts of up to £6,000 per person or £12,000 for couples this festive season.

Small gifts of up to £250 can be given to any number of people tax-free, provided no individual receives more than £250 in total. Mr Dyall explains: "Regular gifts made by people with more income than they need may benefit from the normal expenditure from income exemption."

He said: "This will not help if you only intend to make a one-off gift, but for those who are accumulating savings from excess income, gifting some each Christmas can be a tax-efficient way of helping younger family members."

"Generally, the best time to gift if you can afford it is now. The earlier you gift, the more chance there is of that gift becoming fully exempt," he said, warning the seven-year rule still stands under Labour.