Have you found yourself dipping into savings or investments to lend a hand to loved ones? If so, you’re far from alone. According to a recent survey by AJ Bell, a quarter of investors have either already used their portfolios to support family and friends financially or are considering it. Let’s explore what’s driving this trend and the key factors to consider before making similar moves.

Why Are Investors Sharing the Wealth?

Of the 1,500 investors surveyed in December, 15% had already withdrawn money from their investments to help family or friends, while another 10% were weighing the idea. A striking 76% of these generous individuals had gifted amounts exceeding £2,000.

The most common reason? Helping with property purchases.

• 17% contributed towards a house deposit.
• 12% helped with mortgage costs.

This reflects the ongoing challenges facing younger generations trying to climb onto the property ladder amid high house prices and rising mortgage rates.

Beyond property, other popular reasons included:

• Covering one-off expenses like replacing a car or boiler (17%).
• Helping with everyday bills, such as utility costs (9%).
• Supporting educational expenses (6%).
• Contributing to rent (3%).
• A significant 22% gifted sums with no specific purpose, simply to offer financial support.

A Shift in Inheritance Planning

It’s not just kindness driving this trend – tax considerations also play a role. The current government’s squeeze on inheritance tax (IHT) allowances and proposed changes to include pensions in the IHT regime from 2027 could be influencing decisions.

For many, gifting money now avoids leaving loved ones with an unnecessary tax burden later. By gifting within the annual allowance or using exemptions like the £3,000 annual gift allowance, it’s possible to reduce the size of your estate while supporting those who matter most.

What to Consider Before Gifting

While it’s heartwarming to support loved ones, there’s more to consider than you might initially think:

1. Impact on Your Finances:
   • Will withdrawing funds affect your long-term goals, like retirement?
   • Consider how market conditions might affect your portfolio if you withdraw investments during a downturn.
2. Tax Implications:
   • Gifts over certain thresholds could attract inheritance tax if you pass away within seven years of making them.
   • Be mindful of any capital gains tax (CGT) liabilities if you sell assets to fund the gift.
3. Fairness and Expectations:
   • Once you start gifting, others in your circle might expect similar support.
   • Think about how to communicate your decision to family members, particularly if the gifts are unequal.
4. The Right Investment Strategy:
   • Consider whether your current portfolio is structured to allow for future gifting.
   • Regularly review your investments to ensure they align with your goals and priorities.

Why Seek Advice?

Gifting money might seem straightforward, but the financial, tax, and emotional implications can be complex. Speaking to a financial adviser can help you:

• Understand the tax rules and exemptions.
• Plan gifts in a way that minimises any impact on your long-term financial health.
• Explore strategies to maximise the effectiveness of your gifts, such as using trusts or other financial tools.

Final Thoughts

Generosity can be one of the most rewarding ways to use your wealth, especially when it provides much-needed support to those you care about. However, taking the time to plan properly ensures that you’re not only helping loved ones but also protecting your own financial future.

If you’re considering gifting from your portfolio, reach out to a financial adviser. They’ll help you navigate the options, avoid unnecessary tax pitfalls, and ensure that your generosity doesn’t come at a cost to your own peace of mind.