A gift in the present tense

September can often feel a little nostalgic. Seeing children head back to school can remind us of our own school days, or when our kids were that age - it doesn't feel long ago at all.

There are a number of ways to do this. You could put money aside now for when they're a little older, contribute towards a first home later on, or simply give them more choice as they begin adult life.

What makes this kind of giving different is timing. Rather than passing on wealth through a will, you get to see the difference it makes while you're still part of their life - watching them use it, benefit from it, and build on it.

Starting with a ISAs

For under 18s, a Junior ISA can be a useful place to begin. It must be opened by a parent or guardian with parental responsibility, but once it’s set up, anyone can pay into it. The 2026/27 allowance is £9,000, and any interest or investment growth is tax-free.

You don’t have to use the full allowance. You could pay in a little each month or add money for birthdays and Christmas. Over time those smaller gifts can build into a useful sum.

One thing to remember is that the money belongs to the child. They can take control of the account at 16 and withdraw the money from 18, so you need to be comfortable leaving that decision to them.

Once they turn 18, they could put the money you give them into an ISA in their own name. The ISA allowance is £20,000 for the 2026/27 tax year, and any interest or investment growth is free from UK Income Tax and Capital Gains Tax.

They can choose between cash and investments, depending on when they may need the money and how comfortable they are with its value changing. Investments can fall in value as well as rise.

A regular gift can have another advantage

If your income is more than you need, you may be able to make regular gifts without them being counted for Inheritance Tax. This is known as ‘normal expenditure out of income’. The gifts must come from your usual income and leave you with enough to maintain your normal standard of living.

This could include a monthly payment into a family member’s savings account or regular help with their living costs. There’s no fixed limit, but the payments should follow a regular pattern.

You also have an annual gifting exemption of £3,000. If neither person has already used their exemption, a couple could give £6,000 between them each tax year. Any unused allowance can be carried forward for one year.

Gifts that are not covered by an exemption are usually free from Inheritance Tax if you live for seven years after making them. If you die within that time, whether any tax is due will depend on the value of the gifts and when they were made.

What can you comfortably give?

The tax treatment is only one part of the decision, you also need to feel comfortable parting with the money.

The latest Retirement Living Standards offer a useful guide to annual spending. For one person living outside London, they estimate £32,700 for a moderate retirement lifestyle and £45,400 for a comfortable one. For a two-person household, the figures are £45,400 and £62,700.

These are spending figures rather than the income you would need before tax. They also leave out rent or mortgage payments, social care, dependants and other personal costs. Your own retirement may look very different, especially if travel, family gifts or leaving a larger reserve matter to you.

Cashflow modelling can help you look at the gift alongside the rest of your plans. You can see what a regular payment or larger one-off gift could mean over time, including how things might look if your spending increased or markets had a difficult period.

Deciding what feels right

You don’t need to decide now how much you’ll give your family over the rest of your life. Start with what you would like the money to make possible, what you can comfortably afford and how much you want to keep in reserve.

That makes conversations with your family easier. You can offer help knowing it works with your own plans, and be clear about what you can and cannot take on.

The pleasure of giving during your lifetime is seeing what the money makes possible. With some thought beforehand, you can help your family now, make use of the available tax rules and keep the retirement you want firmly in view.