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Charitable Giving on Death

In April 2011 George Osborne announced in the Budget Speech that the Government will introduce for deaths occurring from 6th April 2012 a reduced rate of Inheritance Tax of 36% where a person leaves 10% or more of their net assets to a charity or charities. George Osborne stated "do the right thing for Charity and the Government will do the right thing by you". Currently any gifts to Charity in your Will do not incur Inheritance Tax.

If a person's estate is liable to Inheritance Tax then after deducting exemptions and reliefs any excess sum (the net estate) is taxable at 40%. So where your estate is subject to Inheritance Tax every £100 left to Charity will reduce the amount remaining for the beneficiaries but will also reduce the Inheritance Tax on the estate by £40. Currently the effective cost of the legacy to Charity to the remaining beneficiaries is £60 per £100 gifted.

From April 2012 if 10% of your net estate is given to Charity, the effective cost of the charitable legacy to the remaining beneficiaries of your Will is only £24 per £100 gifted if you have a taxable estate.

This is good news for Charities. It is designed to encourage us to remember our favourite causes in our Wills. The reduction in the Inheritance Tax rate means that a large charitable gift will have a much smaller impact on your beneficiaries where the estate is liable to Inheritance Tax.

George Osborne and the Government very much want it to become the norm that we leave 10% of our wealth on death to Charity. This is part of the vision for the Big Society.

The precise details of the changes to the tax rate are currently being thrashed out. The Treasury are putting together a consultation paper. The consultation closes on 31st August this year.

A charitable gift post April 2012 reduces what your beneficiaries receive but by significantly less than under the current Inheritance Tax regime. These measures are to be welcomed as it will encourage charitable gifting. It is vital if you are thinking of leaving a gift to Charity in your Will that you take professional advice from a specialist Solicitor.

This article was published in the autumn 2011 edition of the Brace newsletter -www.alzheimers-brace.org.