Who are you going to leave money to in your Will? Your spouse or partner is probably first in line, any children or extended members of the family may pop up here and there too. But what about charity?
Thousands of people every year choose to leave a gift to charity in their Will, whether it is a fixed amount, a fixed percentage of their estate or even just what is left after other gifts have been handed out to surviving loved ones.
It does not have to be a charity that you have been particularly involved with during your life either – you can leave money to any registered charity.
There is another bonus in doing so, besides simply helping a good cause. Legacy giving – where you leave money to a UK charity – can also reduce your Inheritance Tax bill. The same applies to EU charities – for now at least! Strikingly, despite the introduction of the Residence Nil Rate Band, receipts of Inheritance Tax continue to grow with the expected figure topping £5.5 billion this tax year.
With Inheritance Tax, you – or rather your estate – is charged a rate of 40% on every £1 that the estate is valued above the various nil rate thresholds.
However, when you leave money to charity, it will not count towards working out the value of the rest of your estate, giving you the opportunity to reduce the value of your estate below that threshold, ensuring no further tax is payable.
Even if your estate is still valued above the threshold, charitable giving can help reduce your tax bill. If you leave 10% of your net estate to charity, then the Inheritance Tax charged on the remainder of your estate falls from 40% to 36%, a reduction which could see the estate save thousands of pounds in tax.
For advice on drafting your Will and planning your legacy, contact our Estates team on 01903 231545 or email us.