Everyone will be familiar with ‘gift aid’ and there are various other income tax and capital gains tax incentives for giving to charities during your lifetime, such as payroll giving and donating land, property and shares to charities. But you should also consider it as a part of your inheritance tax (IHT) planning when making your Will.
Gifts to charities in your Will are free of IHT and if you gift at least 10% of your estate to charity, there will be a lower rate of IHT to pay on your estate at 36% rather than 40%. This exemption is in addition to the 100% spousal exemption, your own nil rate band of £325,000 and residential nil rate band of £150,000 (rising to £175,000 next tax year) and any transferable IHT exemptions from your spouse. The IHT exemptions of agricultural property relief and business property relief may also be relevant for your estate, depending on your assets.
You should also bear the charitable exemption in mind if you are an Executor administering an estate of someone who has died. If the beneficiaries are willing, it can make sense to enter into a Deed of Variation so that part of the estate of the person who has died goes to charity. As well as being of benefit to the charities you have chosen, it could also mean that the estate can benefit from the 36% rate of IHT. Deeds of Variation must be entered into within 2 years of a person’s death and you should take legal advice on the tax implications of making such a Deed.
If you have any questions or wish to discuss your Will, charitable giving, inheritance tax or administering an estate, please contact Christine Butterfield on 01305 216205 or firstname.lastname@example.org
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