Tax saving incentives for substantial charitable legacies
If you have an estate currently worth more than £325,000, you should plan early and act decisively if you are to avoid burdening your heirs with a future Inheritance Tax (IHT) liability.
During Budget 2011 measures were announced to encourage charitable giving that will be of interest to both the voluntary sector and those who donate to charity. The reduction from 40 per cent to 36 per cent in the rate of IHT will become applicable from 6 April 2012 where 10 per cent or more of a deceased’s net estate is left to charity.
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.
The Chancellor, Mr Osborne told the Commons: ‘If you leave 10 per cent or more of your estate to charity, then the Government will take 10 per cent 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 per cent of your legacy to charity the new norm in our country.’
People with estates larger than £325,000 should arrange their affairs carefully to avoid paying more IHT than they need to. It’s never too early to think about this subject. There is a plethora of things people can do to reduce a liability and ensure they leave the maximum amount to their family and not the taxman. ν
This is a very complicated area of financial planning and obtaining professional advice is essential to preserve your wealth for future generations. For information about how we could help you, please contact us to discuss your requirements.