Godparents and Money Gifts: Tax-Efficient Ways to Give

Godparents (or any close family friend wanting to make a meaningful financial gift to a child) have essentially the same options available as grandparents, without any special ‘godparent’ tax status - but the practical routes are worth understanding clearly.

Contributing directly to an existing account

If the child already has a Junior ISA, Junior SIPP, or Premium Bonds, a godparent can typically contribute directly - for a JISA or Junior SIPP, this usually means asking the parents for the account details to make a bank transfer (see our dedicated articles on both, and on how grandparents contribute, which applies equally to godparents).

Buying Premium Bonds directly

Godparents can buy NS&I Premium Bonds for a child under 16 even if the parents haven’t opened anything themselves (see our dedicated article) - you’ll need the parent or guardian’s agreement and details, as they must be named to look after the Bonds until the child turns 16 and will be asked to verify their identity. It still avoids asking for account numbers, which can make it a simple route for a one-off gift.

Using annual gift exemptions if Inheritance Tax planning matters to you

The same gift allowances covered in our Inheritance series (the £3,000 annual exemption, the £250 small gifts exemption - though not both for the same child in the same tax year - and wedding gift allowances, which are £1,000 for a godparent as a non-relative) apply to godparents exactly as they do to any other individual - there’s no special additional allowance specifically for godparents, but these standard exemptions are worth understanding if the gift is large enough that your own estate planning is a relevant consideration.

A simple cash gift into a bank account

For smaller, occasional gifts (a birthday, a christening or naming ceremony), a straightforward transfer into whatever children’s savings account the parents already use is often the simplest route - no special tax wrapper needed for modest amounts, and it avoids the coordination required for JISA contributions if a large or complex gift isn’t the intention.

Setting up a bare trust for a more structured, larger gift

For a genuinely substantial gift, a bare trust - where the godparent (or another chosen trustee) holds and manages money for the child’s absolute benefit - the child can take control of it at 18 (16 in Scotland) - can be a useful structure separate from the parents’ own accounts (see our Inheritance series article on trusts for the general concept, though a bare trust is one of the simpler structures available, without the ongoing complexity of a discretionary trust). Income from money a godparent gives is taxed as the child’s own income, within their personal allowance - the rule that taxes parents on more than £100 a year of interest from their own gifts doesn’t apply to godparents.

A practical consideration: coordinating rather than duplicating

Since the £9,000 JISA annual allowance is shared across everyone contributing, a godparent making a significant regular contribution benefits from a quick conversation with the parents about how much room remains within the allowance for the year, rather than risking a payment the provider will refuse or return because the allowance has already been used.

The bottom line

Godparents have essentially the same practical options as grandparents or any other family member wanting to give financially - contributing to an existing JISA or Junior SIPP, buying Premium Bonds directly, or using a simple cash gift for smaller amounts. For a genuinely substantial gift, a bare trust offers a structured alternative outside the parents’ own accounts, worth considering with professional advice for larger sums.