The best present to give your grandchildren

Published by Sophie Fillmore on 2019 10 23

The best present to give your grandchildren

The relationship between grandparents and their grandchildren is something quite special. Grandparents often help pay school fee’s and generally enjoy spoiling them rotten. What’s the best present to give your grandchildren? A financial start in life.

Depending on their ages there are different options but remember the important tax considerations!

Junior ISA (JISA):

JISAs are long-term, tax-free savings accounts for children under the age of 18.  There are two options available a cash ISA or stocks and shares ISA. Children can have one or both!

Anyone can pay into a junior ISA, with a maximum of £4,368 paid in for 2019-2020 tax year.

Junior Self-Invested Personal Pension (SIPP):

A Junior SIPP is another tax-efficient way to start building a nest egg for your grandchildren under the age of 18.   You can contribute lump sums or start a regular savings plan from as little as £50 per month, with friends and family able to contribute too.

You can invest up to £2880 during 2019-2020 tax year.

Important Tip: These contributions benefit from basic tax relief (currently 20%) from the government.

So, if you pay in £2880 the government will pay £720 in tax relief = £3600!

Bare/Absolute Trust:

This is used where large amounts of capital are involved, this is a very tax efficient way of providing for minor children.

This is in Trust until the child is over 18, possibly to help with university fees or a deposit on a flat etc.  There are special occasions the Trust can pay before 18, for example funding school fees.

The gift of the capital is potentially exempt transfer of Inheritance Tax and may have tax implications if the donor dies within seven years. There is no income tax implication for the grandparent who sets up a bare/absolute trust for their grandchildren, because they give up the legal title to assets when transferred to the trust.

Top Tip: Grandparents should keep a record of the gifts they have made.

It is always good to have a financial plan in place and a great way to help the younger generation to learn about money and savings.

The UK has plenty of devoted grandparents who want to help their grandchildren enjoy every opportunity.  A financial start in life is the best gift a grandparent can give.