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Last reviewed: August 2026
If you can afford to, helping your grandchildren financially is one of the more satisfying things you can do with money. Rising house prices and the cost of education mean the younger generation faces a harder start than most of us did.
There are several ways to do it, and they suit different intentions. Below is what each one involves, and what it costs you in control, because that is the part that usually matters most.
If your grandchildren are under 18, you can pay into a Junior ISA on their behalf. Up to £9,000 can go in each tax year, and there is no tax on the growth or the income. That limit is frozen until at least the 2030/31 tax year.
The account must be opened by a parent or guardian, but anyone can contribute.
The trade-off: the money becomes theirs at 18, outright and with no conditions. If you would be uncomfortable with an eighteen-year-old having full control of a substantial sum, this is worth thinking about carefully before you start.
Prizes are tax-free and your capital is secure, as National Savings & Investments is backed by HM Treasury. You can buy on behalf of a grandchild and hold the bonds until they turn 16.
The trade-off: your money earns no interest. The only return comes from the monthly prize draw, and most holdings win little or nothing. Over a long period, inflation is likely to reduce what the money will buy. Premium Bonds work better as a gift with a bit of fun attached than as a serious way to build a fund.
There is nothing to stop you setting up a pension for a grandchild. Children can hold one, and anyone can contribute. You can pay in up to £2,880 a year, which the government tops up with basic-rate tax relief to £3,600, even though the child pays no tax.
Started early, the time available does remarkable work. A contribution made for a newborn has around sixty years to grow.
The trade-off: it is locked away until at least age 57, and that age may rise further. This is a gift for a person your grandchild has not yet become. It will not help with university, a car or a deposit.
The simplest option is to give money directly. The main thing to understand is how it interacts with inheritance tax.
Gifts beyond these amounts are potentially exempt transfers. They fall outside your estate entirely if you survive seven years, with taper relief reducing the charge after three.
The trade-off: you have given the money away. Giving away money you may later need is the most common and most costly mistake in this area.
This one is the most useful and the least used. Regular gifts made out of genuine surplus income, income you do not need to maintain your standard of living, can be immediately exempt from inheritance tax, with no seven-year wait and no upper limit.
Paying £200 a month into a grandchild’s Junior ISA from spare pension income, for example, can fall entirely outside your estate from day one.
The trade-off: it requires the gifts to be regular, genuinely from income rather than capital, and properly documented at the time. The record-keeping is what puts people off, and it is also what makes the exemption stand up.
From 6 April 2027, most unused pension funds count towards your estate for inheritance tax. For many families that makes lifetime gifting considerably more attractive than it was, and it changes which pot it makes sense to spend from first.
If you are helping grandchildren and you also have an estate likely to face inheritance tax, the two decisions are closely linked and worth looking at together.
Read our explanation of the April 2027 changes or see how we approach inheritance tax planning.
Work out what you can genuinely afford to give away, allowing for the possibility of living a long time and needing care. Everything above is straightforward once that question is answered, and none of it is worth doing until it is.
Figures correct for the 2026/27 tax year. This article is for general information and does not constitute personal advice. Tax treatment depends on your individual circumstances and may be subject to change in future. The value of investments can fall as well as rise and you may get back less than you invested. The Financial Conduct Authority does not regulate tax advice or estate planning.
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Lee Barton (Leicester) | Ian Laker (Tamworth) | Chris Wood (Coventry)
Bosworth Wealth Management is authorised and regulated by the Financial Conduct Authority. FCA firm reference number 805232.
Our advisers are based in Leicester, Tamworth, Coventry and King’s Lynn, and we work with clients across the UK.
The value of investments can fall as well as rise and you may get back less than you invested. Tax treatment depends on your individual circumstances and may be subject to change in future.