Additional incentives for substantial charitable legacies

Measures to encourage charitable giving will be of interest to both the voluntary sector and those who donate to charity. The reduction from 40% to 36% in the rate of Inheritance Tax (IHT) applicable from 6th April 2012, where 10% or more of a deceased’s net estate is left to charity should provide additional incentives for substantial charitable legacies.

The relaxation on the limits which restrict the value of benefits that individuals may receive as a result of making charitable donations that qualify for Gift Aid, raising the overall cap of £500 to £2,500 from 6th April 2011, should encourage more giving. Similar arguments apply to the simplification of the administration of Gift Aid through the introduction of online filing and allowing charities to claim Gift Aid on up to £5,000 of small donations per year without the need for Gift Aid declarations.

Other changes to charities and charitable giving

Gifts of art – the Government is considering the introduction of a lifetime tax reduction for taxpayers who give a work of art or an historical object to the State.

Gift Aid records – with the abolition of form filing for small sums (£10 or below), Gift Aid will be claimable on smaller donations for charities from April 2013.

Gift Aid donor benefit limits – from 6th April 2011 the maximum value of benefits that an individual or company can receive as a result of making a donation to charity of more than £10,000 under Gift Aid increased from £500 to £2,500. The current rule of the benefit not exceeding 5% of the gift will remain.

Other changes to the Inheritance Tax nil rate band
The current £325,000 nil rate IHT band is frozen until April 2015, and will be indexed against the consumer prices index measure of inflation.

The move to boost philanthropy, known as “10 for 10”, will cost the Treasury about £170m a year by 2015/16 but it is estimated the measure could result in more than £350m worth of additional legacies in the first four years of the scheme.

Mr Osborne told the Commons: “If you leave 10% or more of your estate to charity, then the Government will take 10% off your IHT rate. Let’s be clear: no beneficiaries will be better off, just the charities to the tune of £300m. I want to make giving 10% of your legacy to charity the new norm in our country”.