Tax Tips for Parents and Grandparents: Maximizing Financial Gifts
As the end of the tax year approaches, it’s crucial for parents and grandparents to consider the various ways they can make tax-efficient financial gifts to their children and grandchildren. From utilizing inheritance tax annual exemptions to boosting junior ISAs and lifetime ISAs, there are several strategies to secure the financial future of your loved ones.
Utilize Inheritance Tax Annual Exemptions
Inheritance tax (IHT) can be a concern for many families, but there are ways to mitigate its impact. Each tax year, individuals can gift up to £3,000 without it being added to the value of their estate. This allowance can be carried forward for one tax year, allowing for potential tax-free gifts of up to £6,000. Couples can double these figures, making it a valuable strategy for long-term financial planning.
Boost Junior ISAs and Lifetime ISAs
For the 2023-24 tax year, individuals can contribute up to £20,000 across adult ISAs, including cash ISAs and stocks and shares ISAs. Parents and grandparents can also make contributions to their children’s or grandchildren’s ISAs, taking advantage of government bonuses and tax-free savings opportunities. Opening a junior ISA for children under 18 is another way to kickstart their savings journey.
Secure the Future with Pension Contributions
Cash gifts can also be directed towards children’s or grandchildren’s pensions, with government tax relief providing additional benefits. By contributing to a child’s pension fund, parents can not only boost their retirement savings but also potentially reduce their taxable income, allowing them to retain child benefits.
Maximize Child Benefit with Pension Contributions
Paying into a pension can help parents reclaim child benefits that may be lost due to income thresholds. By strategically managing pension contributions, families can retain child benefits and enhance their overall financial well-being.
By following these tax planning tips before the tax year deadline, parents and grandparents can ensure a secure financial future for their younger generations.
