Three financial benefits of gifting some of your wealth this Christmas and beyond

Exchanging presents with your loved ones might be an important and fun part of the festive season for you and your family. Indeed, a perfectly chosen gift can bring great joy to both the giver and the receiver.

While it’s traditional to leave a few neatly wrapped presents under the tree, sharing some of your wealth at Christmas can be an emotionally and financially rewarding experience.

Moreover, carefully planned financial gifting could be a clever way to pass on your wealth tax-efficiently.

Keep reading to discover three financial benefits of gifting money this Christmas and beyond.

1. Claim tax relief by donating to a worthy cause through Gift Aid

According to the BBC, an estimated four million fewer people are donating charity in 2025 compared to pre-Covid levels. This shortfall is largely due to rising household bills and a lack of interest from younger people.

As such, if you have a cause that’s close to your heart, it may need your support now more than ever. What’s more, some charities have higher costs at Christmas, such as those focusing on homelessness and food poverty.

Donating through Gift Aid could benefit both you and your chosen charity

Gift Aid is a government scheme that allows charities and community amateur sports clubs (CASCs) to claim back basic-rate tax on a UK taxpayer’s donation (provided the individual has paid sufficient tax to qualify).

This means that your contribution could be worth 25% more than if you opt out of Gift Aid. In other words, for every £1 you donate, the charity can claim an extra 25p – at no cost to you.

Donating through Gift Aid could be good news for you financially too.

If you’re a higher- or additional-rate taxpayer in England, Wales or Northern Ireland, you can claim back the difference between your tax rate and the basic rate of tax that the charity or CASC claims.

For example, if you donate £1,000 to your chosen cause as a higher-rate taxpayer:

• The charity reclaims the 20% basic tax rate from HMRC, boosting your donation to £1,250
• You could claim 20% tax relief (the difference between your 40% tax rate and the basic rate) on your £1,000 donation, meaning £250 comes back to you.

It only takes a few minutes to complete a Gift Aid form that the charity will give you. However, the Charities Aid Foundation has revealed that every year charities miss out on more than £500 million in Gift Aid because a quarter of eligible donors don’t opt in.

If you’re a higher- or additional-rate taxpayer, you can claim tax relief on your donation through your self-assessment tax return or by contacting HMRC and asking them to change your tax code.

2. Build wealth for your child or grandchild’s future by contributing to their Junior ISA

A Junior ISA (JISA) offers a tax-efficient way to save and invest for your child or grandchild’s future this Christmas and beyond. This is because funds held in either a Cash JISA or a Stocks and Shares JISA can grow free of capital gains tax, income tax and dividend tax.

A JISA is designed for under-18s and can only be set up by a parent or legal guardian. However, once the account is set up, anyone can contribute, including grandparents, aunts, uncles or family friends.

In her recent Autumn Budget, Chancellor Rachel Reeves froze the annual JISA allowance at £9,000 until April 2031. This is the maximum you can pay across all your child or grandchild’s JISAs tax-efficiently in a single tax year. Any contributions you make to a JISA do not affect your individual adult ISA allowance.

Even small contributions could add up over time, thanks to the powerful effect of compounding returns. In simple terms, this means earning returns on your initial investment as well as on previous returns.

Figures published by Standard Life reveal that there are 400 JISA accounts held in the UK with a value of at least £100,000, thanks to careful saving by parents and grandparents.

If you have children or grandchildren who are over 18, you can’t pay directly into their adult ISAs. However, you could gift them some money to top up their chosen ISA account. Bear in mind that gifts that exceed the £3,000 ‘annual exemption’ could trigger an inheritance tax (IHT) charge later on (more on this next).

3. Reduce a potential inheritance tax bill by using your annual gifting exemptions

IHT is a tax your beneficiaries may have to pay on your estate after you pass away. The standard rate is 40% (2025/26), which is payable on the amount of your estate that exceeds the IHT thresholds. Your spouse or civil partner usually won’t face an IHT bill if you leave everything to them.

Unfortunately, the number of estates triggering an IHT charge is on the rise. Figures published by FTAdviser reveal that IHT receipts increased by £5.2 billion between April and October 2025, 3% more than in the same period last year.

That’s why it’s crucial to make full use of your annual gifting exemptions and allowances, as these could reduce the value of your estate for IHT purposes.

So, this Christmas, you might like to consider making financial gifts using:

• The annual exemption – Give gifts worth up to £3,000 each year (2025/26) to one person or split between multiple people, without them being added to the value of your estate
• The small gift allowance – Give as many small gifts of up to £250 without triggering an IHT charge, provided you’ve not used another allowance on the same person
• Gifts for weddings and civil partnerships – Give an IHT-free gift to someone who is getting married or entering into a civil partnership. You can give up to £5,000 to a child, £2,500 to a grandchild or great-grandchild and £1,000 to any other person

IHT planning can be complex and the above is not an exhaustive list of the gifting options that may be available to you.

That’s why it’s essential to speak to your financial planner before sharing your wealth. They can help you navigate tax rules and ensure that your financial gifts are as tax-efficient as possible – both during the festive season and in the future.

Please note

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

All information is correct at the time of writing and is subject to change in the future

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

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

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.