Wealth
One of the greatest advantages of financial planning is having the opportunity to see your wealth make a positive difference during your lifetime. Whether that is helping a child buy their first home, contributing towards school or university costs, or giving grandchildren a financial head start, many families want to share their wealth during their lifetime rather than waiting until it forms part of their estate.
The good news is that there are several ways to do this efficiently. With the right planning, you can support the people you care about while making the most of the available tax allowances and ensuring your own financial future remains secure.
Traditionally, wealth passed from one generation to the next after death. Today, however, many families are choosing a different approach. The rising cost of housing, increasing education expenses and a higher cost of living mean financial support often has a much greater impact when it is given earlier in life.
Helping a child with a house deposit or contributing towards childcare costs today may provide far more value than leaving the same money decades later. For many grandparents, there is also something deeply rewarding about seeing the difference their support makes while they are still here to enjoy it.
Before making any gifts, it is important to ensure your own financial future is protected. Questions worth considering include:
These are not reasons not to help your family, they are reasons to plan carefully. A well-constructed financial plan can help you understand what you can comfortably afford to give away without compromising your own lifestyle or future security.
Every individual can give away up to £3,000 each tax year without the gift forming part of their estate for inheritance tax purposes. If you did not use your allowance in the previous tax year, you may also be able to carry it forward for one year. While £3,000 may not sound significant on its own, using this exemption consistently over many years can make a meaningful difference, particularly for couples who can each use their own allowance.
One of the most overlooked inheritance tax exemptions allows you to make regular gifts from surplus income. Provided certain conditions are met, these gifts can be immediately exempt from inheritance tax rather than falling under the seven-year rule.
For retirees or individuals whose income comfortably exceeds their normal spending, this can be an effective way to provide ongoing support to children or grandchildren while gradually reducing the value of their estate. This exemption is particularly useful for helping with regular expenses such as school fees, childcare or monthly savings contributions.
Rather than simply giving cash, many families choose to invest for younger generations. Contributing towards a Junior ISA or Junior Pension allows money to be invested over many years, giving it greater opportunity to benefit from long-term investment growth.
Even relatively modest contributions made consistently throughout childhood can grow into a valuable financial foundation by adulthood. For families looking to create lasting financial security rather than short-term spending money, these options can be particularly attractive.
Sometimes, a larger gift is appropriate. Perhaps you’re helping a child purchase their first home or providing financial support during a significant life event. Larger gifts are often treated as Potentially Exempt Transfers (PETs), meaning they generally fall outside your estate if you survive for seven years after making the gift.
Although the seven-year rule is well known, it should not be viewed in isolation. Larger gifts should always be considered alongside your wider financial plan to ensure you are not giving away money you may later need yourself.
Tax efficiency is important, but it should not be the only factor influencing your decisions. The following areas often matter just as much:
In many cases, the emotional value of helping someone at the right stage of their life far outweighs any tax considerations.
Some families are understandably concerned about giving significant sums directly to younger generations. You may wish to retain some control over how the money is used, particularly if beneficiaries are young, financially inexperienced or there are concerns about future relationship breakdowns.
In these circumstances, trusts may form part of a wider estate planning strategy. While trusts can offer greater flexibility and control, they also introduce additional legal and tax considerations, making professional advice particularly important before proceeding.
Whatever approach you choose, keeping clear records is essential. Your executors may one day need to demonstrate:
Maintaining a simple gifting record throughout your lifetime can make administering your estate significantly easier for your loved ones and reduce the likelihood of queries from HMRC.
There’s no single “best” way to pass on wealth. Some families prioritise helping children onto the property ladder. Others focus on supporting education, reducing future inheritance tax or creating financial security for future generations. The most effective strategy depends on your financial position, your family’s circumstances and your long-term objectives.
That is why gifting should not be viewed as a standalone exercise. It works best as part of a wider financial plan that balances your own needs with your desire to support those closest to you. Using tools such as cash flow modelling can help you understand how much you can afford to give away, when to make gifts and how those decisions could affect your financial future.
Helping your children or grandchildren financially is one of the most meaningful ways to share your wealth. Whether you are making regular gifts, contributing towards long-term investments or helping fund life’s major milestones, thoughtful planning can ensure your support has the greatest possible impact.
By combining practical financial planning with an understanding of the available inheritance tax exemptions, you can create a strategy that benefits both your family today and future generations tomorrow.
Every family’s circumstances are unique, and the most appropriate gifting strategy will depend on your wider financial objectives. If you are considering helping your children or grandchildren financially, our experienced financial planners can help you understand your options and develop a strategy that’s right for you.
Arrange a conversation with one of our advisers to explore how thoughtful financial planning can help you support the next generation with confidence.
Remember, all decisions should be considered in the context of your own personal circumstances.
You can reach us at info@thepennygroup.co.uk or on 0207 061 2345.
And for a fuller discussion on gifting more generally you can view our recent Gifting wisely: The future of family wealth webinar.
A Stocks and Shares ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Estate planning and trusts are not regulated by the Financial Conduct Authority.
The Penny Group Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 28/07/2026
