Financial gifts from friends and family
April 2010
The £100 rule applies to financial gifts from parents, which limits the amount of tax-free interest parents’ gifts can earn. However this doesn’t apply to gifts from friends and family - they can give your children as much as they want to.
Any interest earned on these savings would be offset against the child’s own personal allowance (£6,475 for the 2010/11 tax year). So as long as the total amount of interest falls within this allowance, then no tax will be payable.
However, there are potential Inheritance Tax (IHT) implications in the event of the person gifting money dying within seven years of the gift. You can find out more about the rules around this in our section on Gifting and Inheritance Tax.
To help keep the money from friends and relatives separate from gifts from parents, it’s advisable to open separate accounts so that it’s easy to keep track of what interest relates to which gifts.
For more information on the £100 rule, please read The basics – Giving money to your children or investing on their behalf .
