Gifting money to children explained

Gifting money to your children can give them a financial head start, and help them learn how to manage money. However, there are tax implications and rules you need to be aware of before you give your children large amounts of money. On this page, you’ll learn what these rules are, what the tax implications are on large gifts and things you may want to consider before you give your children money.

Gifting money to childrenGifting money to childrenGifting money to children
The rundown
  • Gifting money to children isn’t always subject to tax, as you have an annual gift allowance of £3,000
  • If you don’t use your annual gift allowance, you can roll it over into the following year once, giving you a total allowance of £6,000 to gift your children in one year
  • Tax on large gifts can apply if you pass away within seven years of gifting money

What are the rules on gifting money to children?

You can gift money to your children in lump sums because every UK citizen has an annual tax-free gift allowance of £3,000. This enables you to give money to your children without worrying about inheritance tax. It’s important to note that this is your total personal allowance, which means you can’t give away £3,000 to each child you have. You may need to split this amount between your children to effectively use your allowance. Note that this is a per person allowance, so both parents may gift £3,000 each per year.

If you don’t use your total annual gift allowance, you can carry it over to the following year, although you can only do this once. If you don’t use your allowance in the second year, the tax-free allowance resets to £3,000 at the end of that time. This roll-over does mean that you are able to give your children up to £6,000 in one year

You’re allowed to gift smaller sums of money, up to £250 a year, to as many people as you want. However, you can’t combine this with your annual tax-free gift allowance. This means you can’t gift your child £3,000 plus an additional £250, as you will be taxed on anything over £3,000.

If you’re considering giving money to older children, you may ask yourself the question, “if I gift money to my children, might it affect the income tax they have to pay and push them up into a higher tax band?” Not to worry, HMRC doesn’t count gifts as income, which means your children are not liable to income tax on financial gifts you give them.

Can I gift money to children under 18?

Yes, you can gift money to children under the age of 18, although it’s important to be aware of certain rules.

There’s a limit of £100 on the amount of interest a child can earn on the money you gift them if they are under 18. This limit is designed to prevent parents from using their child’s tax-free allowance to avoid income tax on their personal income when they file a tax return

Children under the age of 18 can earn up to £100 in interest on any amount you give them without having to pay tax. Anything your child receives above that will be subject to tax. However, this limit doesn’t apply to money given by grandparents, relatives or friends.

Are there any tax implications for larger gifts?

You may have to pay tax if you give your child a monetary gift over £3,000

If you were to pass away within seven years of gifting money to your children, there will be up to a 40% inheritance tax liability if your estate is worth over £325,000. If you live seven years or more after giving a gift, there will be no tax to pay. This rule applies to any gift you give anyone.

What should I consider if I want to gift money to my children?

If you’re still working, you can give your children small, regular sums from your income without incurring tax. If you do this, it’s important that the payments come directly from your income, rather than your savings, and the rules state that these regular payments must not have an impact on your standard of living

You may also want to consider saving a small amount each month so that you earn interest, and then gifting your children a lump sum at the end of each year. This money could then be put into a lump sum savings account to earn more interest until the day your child wants to access their savings pot.

Start saving for a gift for your children

If you want to quickly and easily open a savings account and start saving for a gift for your children, register for a Raisin UK Account and apply today. Opening an account with Raisin UK is free and offers competitive interest rates from a range of UK banks.

Tooth Fairy Fortune

How much does the Tooth Fairy spend every year? Raisin UK uncovers the costs.

The tooth fairy shells out over £818 MILLION a year!

It’s often one of our first experiences with money, and probably one of the most magical. You go through the pain of losing your first tooth, pop it under your pillow when you go to sleep, and the next day you discover that the Tooth Fairy has come and swapped your tooth for a shiny coin.

Whilst we don’t know where Tooth Fairies get their seemingly bottomless pot of funds from, the financial experts at Raisin UK have worked out the exact size of the global Tooth Fairy fortune, including why explaining gifting to your children before they become adults is a good idea.

The average cost per tooth is now £3.42 in the UK

UK kids today appear to be making a pretty penny for each tooth as the national average the Tooth Fairy is dishing out is £3.42 – and with children expected to lose all their 20 baby teeth by the time they’re 12-14, this means there’s an extra £68.40 to be made alongside pocket money!

However, this figure isn’t universal and varies across the UK. According to research by Stem Protect, Children in Bradford receive £0.50 per tooth on average, whereas the Tooth Fairy grants a whopping £2.50 per tooth for children in Harrogate.

Ultimately, if each child in the UK lost only one tooth per year, the Tooth Fairy fortune would have to amass to a staggering £40.9 million to cover the money left under pillows, or £818.1 million a year if each child lost all their milk teeth!

US Tooth Fairies leave the dollar bill behind, shedding out $4.70 for one tooth

Across the pond, It seems the funds for US tooth fairies have increased even more than in the UK. On average, US children are receiving $4.70 per tooth – that’s just under $100 ($94) for their full set of baby teeth!

However, not all children in America are getting this generous handout from Tooth Fairies. Children in the Midwest receive the least on average at $3.71 per tooth, whereas Tooth Fairies in the Northeast of the USA are splashing out $4.35 a tooth!

Children under the age of 14 currently make up around 21.4% of the US population (around 60.2 million). If each child lost one tooth a year, the Tooth Fairies’ bill would be a whopping $283.1 million a year! If every child lost only half their baby teeth, the Tooth Fairies would need $2.8 billion to keep up with America’s dental demands.

The reality is parents are shelling out £68.40 per child

In reality, the disparity between countries and towns shows that numerous factors come into play when gifting cash for your children’s teeth as the Tooth Fairy.

The disparity in cost per tooth is clear when looking at research from Stem Protect. In areas of relatively high socioeconomic wealth such as Harrogate, children are earning more per tooth.

Area Rate Rate x 20 teeth
Bradford £0.50 £10.00
Edinburgh £0.75 £15.00
Nottingham £1.00 £20.00
Manchester £1.20 £24.00
Bristol £1.25 £25.00
London £1.50 £30.00
Leeds £1.50 £30.00
Harrogate £2.50 £50.00

In Ireland and Spain, however, the Tooth Fairy is paying out €3.90 (£3.36) per tooth, which calculates to €78.00 (£67) per mouth, the Spanish Tooth Fairy gives £464,104,913.90 away each year, and the Japanese Tooth Fairy spends £1,016,585,320.21 per year.

What’s influenced the Tooth Fairy inflation?

The Tooth Fairy has different rates everywhere.  Whether it’s because of how far they have to travel, the rate varies across the UK. Tooth Fairies also pay less for unclean bedrooms, not going to bed on time, and not eating vegetables. If you can, try and let the fairies know they are due, so they have time to write a note in the diary, drop off your money with plenty of notice, and dip into their savings in time.

If you’re determined to grow your money into the kind of fortune that Tooth Fairies have, why not start by growing your savings? At Raisin UK, our marketplace is home to savings accounts that could help you grow your money by more than the pocket change the Tooth Fairy might give you.


Each child has around 20 baby teeth that fall out by the time they are aged 12-14. Raisin UK analysed data to find out how much each parent has to pay out for each tooth when they fall out, and which areas pay the most. We used the population from ages 0-14 and used the data to multiply by the amount of 20 teeth. The cost per tooth given by parents or the ‘tooth fairy’ was taken from multiple studies by Delta Dental and Stem Protect.


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