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How to gift stocks this Christmas

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·4-min read
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stock and shares
Searches for for 'gifting shares to family members UK' in the UK surged 180% in time for the holiday season. Photo: Brendan McDermid/Reuters

If you’re not sure what to get your loved ones for Christmas this year and want to think beyond the usual clothes and toys, it might be worth gifting them something that could help them with their finances in the long-run: stocks.

A study by IG showed searches for for “gifting shares to family members UK” in the UK surged 180% in time for the holiday season.

Globally, there has been an 80% increase in searches for “how to purchase stocks as a gift”.

Chris Beauchamp, chief market analyst at IG, said “gifting shares, particularly to young people, might not rank among the most exciting presents, but they represent a much better long-term gift than some rapidly disposed-of toy or a well-meaning pair of socks."

He said: "Choose shares whose prospects look good at the present time and of companies that are well-managed, ideally with a sound dividend stream and cash generation too."

He added that it is worth having a discussion of the merits and pitfalls of investing with the recipient, especially if they have never invested before - "some background education on how the market works and its value as long-term investment would not be a bad gift either."

Meanwhile Laura Hoy, equity analyst at Hargreaves Lansdown, said when gifting stocks to children, it helps to do so for a company they have heard of and know what it does.

“As they’re unlikely to have the time or know-how to manage an investment portfolio, buying stocks that will stand the test of time is a good idea. This means companies that have healthy cash flow and a solid balance sheet,” she said.

Buying dividend stocks and setting them up in such a way that the payout is reinvested can also be an opportunity to teach kids about the power of compound interest. Hoy suggests utility stocks.

If you have an avid investor in the family, consider giving them growth stocks, said Hoy. Particularly if they like to capitalise on budding trends or unproven technology.

Read more: ISAs remain super stars of UK's tax saving options

Practically, one way to gift shares is via Interactive Investor.

A a customer can complete an account-to-account transfer online from one trading account to another, as long as the two accounts are at the same address.

This is an anti-fraud measure, the stock broker said, as most people gifting shares are doing so between spouses and children.

It is possible to allow customers to gift shares between accounts where the addresses different, but it’s a manual process, and each one needs approval from their compliance team. The process is handled by the transfers team.

“If you have shares that you want to give to someone else, it should be possible to arrange a transfer. You’ll need to contact the investment company where they have an account and ask them what process you need to follow,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

Read more: Child Trust Fund: How to find your child's share of £9bn government money

From a tax perspective, Coles said “the thing to be aware of is that this will count towards your capital gains tax allowance, so if you realise a gain over £12,300 during the tax year, including the shares you’re giving away, you could be subject to capital gains tax.”

If gifting to an adult, she said it might be worth giving them the money and suggesting they invest it

“You can pay into their ISA, but they would need to make the investment themselves.”

She said buying shares for children is a bit easier, because one can pay into their Junior ISA, although the named contact on the JISA would have to make the investment for them.

Setting up a bare trust for the child is also an option and isn’t as complicated or expensive as other kinds of trust.

"So you pick trustees, complete a form from your investment company, and the trust is set up," she said.

Watch: What is inheritance tax?

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