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7 September 2021 | Comment | Article by Matthew Evans

Remember a Charity Week – legacies to charity and inheritance tax


7 September 2021, by Mary McCutchan

There are many reasons to remember charities in your will, and the benefits may make you re-consider if you are unsure about who to leave your money to.

Remember a Charity Week seems like the perfect time to consider your options, and there are more advantages than you may be aware of.

Currently each person has a £325,000 inheritance tax-free allowance, known as the nil-rate band, up to which there is no inheritance tax to pay. Depending on your circumstances, up to an additional £325,000 allowance may be available should your spouse or civil partner die before you, leaving their entire estate to you (this additional allowance is known as the transferable nil rate band). Any assets that you own above these allowances will be taxed at a standard rate of 40%, subject to any exemptions that may be available.

Legacies left to charities are entirely exempt from inheritance tax, and so leaving a legacy to charity can help to reduce the inheritance tax bill payable by your estate.

In April 2012, the government also introduced further measures to encourage charitable legacies, under which if you leave more than 10% of your estate to charity, the rate at which inheritance tax is due on your estate that is over the available tax-free allowances, reduces from 40% to 36%.

Utilising this relief can, in some circumstances, increase the residuary estate that is available for the beneficiaries, as well as benefiting your chosen charities.
When leaving a legacy to charity, it is important to ensure that the legacy is correctly worded so that it takes effect in accordance with your intentions, after your death. The availability of the 36% rate of inheritance tax can also be complex.

If are considering making changes to your will, you should seek legal advice before proceeding, to ensure your wishes are fulfilled.

Need help?

If you need legal advice about writing or amending a will, our dedicated team of experienced will advisors can help.

Author bio

Matthew is a partner and heads up the firm’s private wealth offering. He is responsible for the development, implementation and long-term strategy of the team.

Matthew has a UK-wide reputation in the field of contentious probate, recognised by his clients and peers in the leading legal directories.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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