With the Christmas season in full swing, you may have already finished your gift shopping. Then again, you may be feeling uninspired, wondering how to give your loved ones something meaningful this year.

Generosity at Christmas doesn’t just have to be presents under the tree. Financial support for your family can often be more welcome than physical gifts. It can also be a lovely time of year to consider donating to charity.

Gifting financially can bring a great sense of joy to you too, as you see the impact your help can make. However, it’s important to take a sensible approach and not get carried away. Giving is wonderful, but you do need to consider your long-term security in the process.

Read on to discover four easy ways to sustainably financially support your loved ones, as well as your chosen charities, this festive season.

Unwanted gifts can cause a significant waste of time, money, and resources

Giving gifts at Christmas is lovely, but it can also be exhausting, especially if you have a large family. Fighting through crowded shops, navigating endless Black Friday promotions, and feeling the need to “balance” what you’re gifting so it’s fair to everyone can make shopping somewhat stressful.

This can be especially galling when you find your gifts simply added to piles of others, and you aren’t even sure if they will be used.

According to Finder, 3 in 5 Brits (58%) received an unwanted gift at Christmas, which is around 31 million adults. The total spend on unwanted gifts at Christmas is estimated to be £1.27 billion.

And GWP Group reports that 25 million toys gifted for Christmas are neglected by the end of January.

All of which adds up to a waste of time and money. While you might still want to get your family some small gifts to open on the big day, there are many smarter ways you can gift to them this Christmas.

4 ways to gift financially and tax-efficiently

1. Pay into a Junior ISA

Junior ISAs can be a great way to get children off to a strong start in life, either through savings in a Cash JISA or investments in a Stocks and Shares JISA. Parents or guardians open the account, and other family members may contribute to it. The JISA allowance in 2025/26 is up to £9,000 across all your child’s accounts.

This can help the children in your life with their financial future, and it also makes good sense from a tax perspective. Interest on a Cash JISA is not subject to Income Tax, while a Stocks and Shares JISA is also tax-efficient, with any gains exempt from Capital Gains Tax (CGT).

Once the child turns 18, the JISA will automatically be converted to an adult ISA and retain its tax-efficient benefits.

2. Contribute to a Lifetime ISA

Much like JISAs, Lifetime ISAs (LISAs) are offered as cash or investment options and are available to anyone aged between 18 and 39. You can put up to £4,000 into a LISA each year, and the government adds a 25% bonus on contributions.

For example, if you put £4,000 into a LISA, the government will add a £1,000 bonus. While the £4,000 counts towards the annual ISA allowance (£20,000 in 2025/26), the bonus does not.

You must then use the funds for buying a first home or for retirement. So, giving a child or grandchild funds to contribute to a LISA can be a great way to help them save towards their first property or make an early start on retirement saving.

Just note that if they withdraw the money before the age of 60 and don’t use it to buy a first home, withdrawals will be subject to a 25% penalty.

3. Support students at university

Student life can be expensive, with tuition fees and housing costs, as well as general maintenance and living expenses.

If you have children or grandchildren at university, helping out with rent or other costs can make a huge difference and reduce the amount of debt they leave with.

4. Use Inheritance Tax allowances and exemptions

It’s always a good idea to understand your allowances and exemptions, so you can make the most of your gifting for both the recipient and yourself. You could consider using these rules to make gifts that are free from Inheritance Tax (IHT).

  • Gifts from surplus income

This can be an excellent way to support your loved ones and potentially reduce your IHT liability. There are a few rules to consider when using this option for gifting:

    • Gifts need to be regular, such as monthly, quarterly, or annually.
    • They need to be from income, such as your pension or salary, and not from savings or capital.
    • After making the gift, you must still have enough income to cover your usual standard of living.

This money immediately falls outside your estate for IHT purposes. It’s important to keep detailed documentation to show that your gifts meet the criteria; setting up a standing order can be a good idea, as it demonstrates regular payments.

Offering this as a Christmas gift could take the form of a promise of a regular financial gift throughout the coming year, or for as long as you choose.

  • Make use of your annual gifting exemption

This exemption allows you to make tax-free gifts each tax year (up to £3,000 in 2025/26), which will be excluded from your estate for IHT purposes. This could be to one person or several recipients. You can carry this allowance over by one year only, so can double up the following tax year.

  • Give small gifts

Payments up to £250 per person are classed as “small gifts”, which are also exempt from IHT.

  • Make larger gifts, but be aware of the seven-year rule

You can make larger gifts of any size, and they will fall outside the remit of your estate after seven years. These can be subject to a tapered relief after the third year, with gifts taxed on a sliding scale.

  • Gift to charity

It can be rewarding to give to charity at Christmas. If you pay Income Tax or Capital Gains Tax (CGT), your gifts could also be eligible for Gift Aid. This means the charity can claim an extra 25p for every pound you donate, at no extra cost to you.

You could even consider leaving a legacy gift to charity in your will. This helps to support your chosen charity even after you’re gone. Charitable donations aren’t included in your estate for IHT purposes, and if you donate 10% or more of your estate, the rate of IHT charged on your wealth will be reduced to 36%.

Make sure you can still reach your goals after gifting

While it’s understandable you want to be generous to your loved ones, especially at Christmas, you need to be realistic about what you can afford.

The ways outlined here can help you make small, regular, or even large financial gifts to friends, family, and charities, mitigating your tax liability at the same time.

Having a robust, well-structured financial plan can help you manage your annual gifting effectively, so you can give away the maximum amount without negatively impacting your finances.

We can help you create a financial strategy from scratch or review your existing plan to make sure it aligns with your approach to gifting.

If you’d like to talk to us at any time, we’ll always be happy to help. Email hello@intelligentpensions.com or call 0800 077 8807.

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.

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.