You might consider buying shares as a gift for a loved one for several reasons. You might want to help them build their wealth, as in the case of children and grandchildren. Or you might want to give someone a gift of shares for their symbolic value – maybe of a company you both love, or one that has some emotional resonance with the recipient.
Since 2010, stocks have outpaced other traditional luxury presents like watches, diamonds and gold in terms of price appreciation. But the process of how to gift shares to someone else might seem tricky at first, especially when it comes to tax. Here is what you should know before gifting or transferring shares.
Can you buy shares as a gift?
Yes, this is definitely possible. There are a few ways you can go about gifting shares. But it’s not always the most convenient thing to do. Giving shares as a gift in the UK can often be more of a symbolic gesture than a practical one (from an investment perspective).
Also, due to anti-money laundering rules, you cannot gift shares as a surprise. So, whoever you’re buying shares for will need to give consent ahead of time. There is an exception to this if the recipient is a minor.
How to buy shares as a gift
Here’s a step-by-step guide explaining the basic process of buying and gifting shares:
- Choose the shares: Decide on the shares you wish to buy as a gift or if you want to use existing stocks and shares you own and transfer them as a gift.
- Check that gifting is possible: There can sometimes be restrictions around particular shares or investments that make it more difficult to gift them. It can be worth checking with the company directly through its “investor relations” page.
- Speak to a brokerage: Each broker may have different processes for buying shares as a gift. It’s best to contact them, let them know which shares you want to buy and ask what documents and information they need to transfer them.
- Select the format: Decide if you want physical share certificates to make the gift more of a unique gesture or buy shares electronically for a more practical gift of shares.
- Transfer shares as a gift: You’ll need to complete and sign a stock or share transfer form (Form J30), which includes the details of the person to whom you’re gifting shares. Then submit completed forms with any attached shares for gifting. Your share dealing platform should be able to walk you through this.
Tax on a gift of shares
This can be a slightly complex topic because it often depends on the nature of the transfer and to whom you’re looking to gift shares. The UK has various tax rules around gifting.
You can find plenty of details online through government websites. But it might be worth seeking some professional advice from a financial adviser or tax planner who can look at your individual situation and circumstances.
Gifting shares to a spouse
If you want to transfer or gift shares to a spouse, this is definitely possible and can be a tax-efficient way to share some of your wealth. Currently, there’s no capital gains tax (CGT) to pay on shares you gift to your spouse. But they may have to pay tax at a later date if they sell the shares.
With most online brokerages, you should be able to gift your shares to a spouse electronically if they also have an account on the same platform. Another tax-efficient method is a process called “Bed and Spouse”. This involves selling your shares and then having your spouse immediately re-purchase them in their own account.
Gifting shares to a charity
Similar to gifting to a spouse, making a transfer or gift to a charity can also be advantageous from a tax planning perspective. Because there’s no capital gains tax (CGT) to pay on assets you give to charity, it can help with Inheritance Tax (IHT) estate planning.
Gifting shares to a friend
Buying shares as a gift for a friend is a little more complex. The process itself isn’t too difficult, but it can have tax implications. You have an annual gift allowance of up to £3,000, but gifts over this level can incur tax costs.
As mentioned previously, you can’t surprise friends with a gift of shares. They’ll need to know ahead of time and give their consent.
Buying shares online vs getting a paper certificate
The easiest way to buy and sell shares is using an online investment broker. Gifting shares with physical paper certificates can be a nice gesture, but it’s not necessarily the most convenient. Buying and selling paper share certificates that you physically hold yourself takes much longer and is much more expensive – and if you’re moving small holdings as a gift, the costs may outweigh the benefits of the investment.
This isn’t so bad if you are giving the shares for their symbolic or sentimental value rather than as a practical investment. Still, you can save time and expense by going online.
When you buy shares, you usually get a confirmation email that contains an image you can print out, and you can usually view images of the share certificates online as well, which you could screenshot and print.
Using an online service also lets you monitor the value of your investments more easily. One minor complication of buying and managing shares online is that the gift recipient also needs an online account.
The easiest thing for them to do would be to open an account with the same broker you use and then have you transfer the shares to their name. If they have an account with another broker, it is still possible but would take longer and could cost more.
Can you buy shares for a child?
Finder’s investment expert Zoe Stabler answers
There are a number of ways you can buy shares for a child in the UK. Children can’t invest and control a portfolio themselves. But you can set up accounts that can be managed until they become an adult, including things like:
- Junior ISA (JISA)
- Child/Junior SIPP
Another option is to buy and hold the shares yourself and then transfer them as a gift to your child once they grow up and can have their own share dealing account.
Pros and cons of buying shares as a gift
- Gifting shares can be a unique, practical and thoughtful thing to do.
- In some cases, it can be a tax-efficient way to transfer assets.
- Buying shares as a gift can help get someone interested in investing.
- There can be tax implications for you and the person you want to gift shares to.
- The potential paperwork can take the fun out of the gift.
- Your investment gift of shares could potentially lose some or all of its value.
Buying shares as a gift can be a unique gesture to make. It can also be worthwhile if you want to transfer shares to a spouse or a charity. The process can be relatively straightforward, but doing something like buying shares for a child in the UK might involve some extra steps like setting up certain accounts.
If you do decide that buying shares as a gift is what you want to do, always double-check to see how the gift of shares might impact your tax situation or that of the person receiving the shares.
In years to come, the recipient could become increasingly grateful for the present. Historically, stocks have trounced luxury gifts like diamonds, watches and gold in terms of price appreciation, offering a chance for impressive wealth growth.
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