Christmas gifts that keep on giving

Post by Mearns & Company in News

An investment could be a wise present to children this Christmas.

What are you going to buy your children or grandchildren this festive season?

Supply chain issues, from lack of computer chips to clogged-up container ports, widely reported in the media, are likely to limit the choice of presents available in 2021. It may already be too late to acquire that new L.O.L. playset or Lego model. As an alternative yuletide approach instead of toys, why not make a longer-term gift of an investment?

There are several obvious advantages:

• There is no risk of stock shortages.
• No batteries are required.
• Avoid tricky gift wrapping.
• It cannot be broken or discarded by Boxing Day.

Most importantly, an investment is something set aside for a child’s future, potentially offering an early piece of financial education. Such an initial grounding matters because even in the 15–18 age range, over a third of children have no in-school access to financial education according to recent research. The same research also found that over half of those questioned would like to have started learning about money between the ages of 11 and 14.

The choice of investments and how ownership should be structured depends upon a variety of factors, not least of which is tax. Children are nearly always non-taxpayers – they have the same £12,570 personal allowance and £12,300 capital gains exempt amount as adults. However, if an investment is given to a minor unmarried child by their parent, in some circumstances any income generated can end up being taxed as if it were the parent’s own. No such rule applies to gifts from others, such as grandparents. All gifts are potentially within the ambit of inheritance tax, although many may be covered, at least in part, by available exemptions.

It may be sensible to use a trust to hold the investment, as this can give the person making the gift more control over when and how it is ultimately used. For more information on this and other aspects of investment gifts, please talk to us, not Santa.

The value of your investment and any income from it 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. Investing in shares should be regarded as a long-term investment and should fit with your overall attitude to risk and financial circumstances.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.