Why Gifting up to 10% of your estate can be beneficial to you, your heirs and charities

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Changes introduced from 6th April 2012 reduce the level of inheritance tax from 40% to 36% where 10% of the ‘net estate’ is gifted to charity. We believe each family should consider gifting 10% of the value of their estate, subject to affordability on death. In the case of a married couple, this would normally be on the second death.

Without a donation With a donation
Gross Estate £1,000,000 Gross Estate £1,000,000
Less: Nil Rate Band -£325,000 Less: Nil Rate Band -£325,000
Net estate on which charitable legacy is calculated £675,000 Net estate on which charitable legacy is calculated £675,000
Received by charity £0 Received by charity -£67,500
Taxable estate £675,000 Taxable estate £607,500
Less: Inheritance tax @ 40% -£270,000 Less: Inheritance tax @ 36% -£218,700
Remaining estate (inc. nil rate band) £730,000 Remaining estate (inc. nil rate band) £713,800

The estate’s beneficiaries ‘lose’ £16,200 but the charity gains £67,500. This represents a benefit to the charity of four times greater than the value of the donation, or put another way, an effective tax relief of 76%

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26 Apr 2024

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