- Buying a home
- University
- Wedding
- Inheritance Tax
- School Fees
5 common reasons for gifting
Gifting also being used to help with the cost of living and debt
Figures are from a survey of 2,000 people by Opinium for Hargreaves Lansdown in May 2023 (released July 2023).
What’s the point of having spare money if we can’t help our loved ones? We want to give them a helping hand, whether that’s with life’s big moments, like buying property, or supporting them when times are tougher.
It’s why a third of people have either already given, or will give, their family members large gifts according to our survey.
5 reasons for gifting
Buying property
The most common reason to give a gift is to help people with a property purchase – which 12% of the people surveyed have done or plan to do. In an economy with average house prices having risen £122,102 between January 2013 and 2023, it’s not surprising many first-time buyers need a bit of financial help. Our data shows family members recognise this.
University or a wedding
Two more of the most common reasons (7%) were to help pay for university or a wedding. Outside the tuition loan, there’s a growing gap between maintenance loans and the cost of living for students. This means lots of families are having to help out. With 92% of students at university saying the cost of living had increased across 2022 and 49% suffering financial difficulties, this gap is widening.
Upcoming rule changes in September could add to this problem, as it means more students will need to pay off their loans in full, with loan terms stretching to 40 years. This erodes their future earnings for longer.
The average wedding in 2023 costs £24,109, according to research carried out by compareweddinginsurance.org.uk. That’s up nearly 11% from 2022, and around 18% from 2021. It’s easy to see why people need help if they’re going to start married life without significant debts.
A key feature of the inheritance tax rules is that they allow specific gifts for weddings to be given and to fall out of your estate for inheritance tax purposes straight away. It means parents can give up to £5,000 to a child, grandparents or great grandparents can give £2,500 and anyone else can give £1,000. This can be combined with the annual exemption of £3,000 – so parents can give £8,000 each to their child, and it will fall out of the estate immediately. Inheritance tax rules can change and benefits depend on your circumstances.
Reducing inheritance tax
Inheritance tax considerations make it with 6% surveyed. This was once something that only the very wealthy had to consider, but with frozen tax thresholds and much higher property values, it’s something more and more people will face. Read our recent article on rising inheritance tax receipts and what you can do.
School fees
Whilst school children may not consider family members paying their school fees as a gift, our survey had school fees (5%). If the giftee that’s paying the school fees pays out of their income, and they aren’t forced to eat into their own capital, then as long as they document it carefully, it can count as a regular gift from income, and will fall out of their estate immediately for tax purposes.
Other reasons for gifting
Unfortunately, reasons for gifting don’t just stop at the positive. A significant number of individuals are also using gifting to help relieve the pressure of rising living costs. Our figures show that 4% are gifting to help others pay off debts, while 3% are supporting them through a personal problem.
If you’re considering gifting as a way to pass something on to your family or the next generation, take a look at our range of products and how they can help every member of the family. This article isn’t personal advice, if you’re unsure on the right options for you, please seek advice.
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