As of 6th April 2012, last year’s budget announcement to introduce a reduced rate of Inheritance Tax for estates that support charitable giving has come into effect.
For deaths occurring after 6th April 2012, an estate which leaves at least 10% to charity will now benefit from a reduced rate of IHT of 36%. If an estate qualifies, the reduced rate is a reduction of 10% on the usual IHT rate of 40%. The reduced rate will apply where 10% or more of a deceased person’s taxable estate (after deducting exemptions reliefs and the nil rate band) is left to charity. The nil rate band is currently £325,000.
The implementation of the new reduced rate coincides with the Legacy10 campaign and is welcomed by the campaign’s supporters. The campaign has the aim of encouraging charitable giving in the UK. Surveys by Legacy10 found that currently only 7% of people leave a gift to charity in their Will. It is hoped that the new rules will increase this figure and boost help for charities.
The president of the Law Society, John Wooton is a supporter of the campaign. He has recently said that he hopes the changes will highlight to the public the benefits of having a Will and having one drawn up properly through a solicitor.
The changes emphasise the need for individuals to seek professional advice to ensure that their Wills achieve their intended purpose. Those who wish to take advantage of the new rate need to be properly advised to ensure that their Wills are drafted correctly and also so that they understand the impact on their other non-charity beneficiaries.
Please contact our probate team if you would like more information about Wills and Estate Planning.