New Legislation Reduces Inheritance Tax When 10 Per Cent Left to Charity
Changes to inheritance tax regulations which came into force on 6 April 2012 have created a win-win situation for both families and charities left a share of an estate in Wills, according to a tax expert at Irwin Mitchell.
New legislation is now in use which means that the rate of inheritance tax payable on an estate is reduced by four per cent in cases where 10 per cent of the taxable estate has been left to a registered charity.
Carol Wells, an adviser in tax issues at Irwin Mitchell, has urged anyone planning to leave charitable gifts in Wills to ensure that they clearly stipulate the amount so that their loved ones benefit from the reduced rate of tax.
She explained: “If someone with an estate worth £500,000 leaves charitable gifts of £15,000 and the rest to children, inheritance tax of £64,000 would be payable on their estate. This means the children would receive £421,000 in total.
“However, if the gift to charity was increased to £17,500 then the children would receive £425,800 and the tax man £56,700. By making a straightforward, modest increase in the gift to the charity, the organisation would receive £2,500 more and the children £4,800 more – all at the expense of the Treasury.
“This is undoubtedly a win-win situation for families and charities across the UK, with the latter reliant on the goodwill of supporters, volunteers and others to continue to raise funds for incredibly important causes.
“We would urge anyone seeking more information on this to seek expert advice on the issue, including those who are in the process of writing a will or others who want to ensure their documentation is updated to highlight their wishes in a clear and concise manner.”