So, what does this mean for you?
When you’re trying to prepare for the future it can be hard to work out whether you’re better off giving to charity before your death or after. The regulations surrounding Inheritance Tax can be baffling and the changes announced in yesterday’s budget have done nothing to simplify matters. They have, however, presented a new opportunity for those families facing an IHT dilemma.
From April 2012, estate beneficiaries will pay the lower rate of 36% instead of the usual 40% Inheritance Tax rate levied on estates above £325,000.00. This will apply if at least 10% of the estate has been left to charity.
The Chancellor’s intention is to encourage charitable giving, whilst making sure that beneficiaries are not left to suffer as a result.
However, families now face a decision of whether to leave the donations in a Will or benefit from Gift Aid donations during their lifetimes. Higher rate tax payers can benefit from this by clawing back a further 20% (30% for those on the highest rate) on donations. When you look at the two situations side by side it can be hard to work out which will leave you and your family better off.
Families facing an Inheritance Tax bill, should seriously consider making a Will or reviewing an existing one to ensure that the new rules are utilised to best effect. By talking to a specialist they will be able to look at your unique circumstances and put together suggestions that work best for you, your family and your estate.