Inheritance Tax can have a significant impact on the value of assets passed on to your loved ones. Leaving a gift to charity in your Will can reduce the Inheritance Tax (IHT) payable by your family and friends.
Inheritance Tax rules
IHT is currently charged at a rate of 40% on assets above certain thresholds.
Each individual has a 'nil-rate band' of £325,000, which means assets in your estate below this amount will not be subject to IHT. For married couples and civil partners, any unused portion of the nil-rate band can be transferred to the surviving partner, potentially doubling the tax-free allowance to £650,000.
Additionally, if you leave your main residence to direct descendants (children, adopted, fostered, or stepchildren and grandchildren), you are entitled to a residence nil-rate band of £175,000 each.
Any assets you hold above these thresholds are taxed at a rate of 40%.
Leaving a Gift in your Will
Leaving a gift to charity in your Will can reduce the IHT payable by your loved ones from 40% to 36%, if used in the correct way.
Gifts to charity themselves are usually exempt from IHT, regardless of the value of the gift. If the gift to charity in a Will meets certain conditions, the lower rate of 36% IHT will apply to the taxable part of an individual's estate.
The reduced rate will apply if an individual leaves at least 10% of their net estate, known as 'the baseline amount', to charity.
Where the gift to charity falls short of the 10% of the baseline amount, it may be possible for a deceased person's beneficiary to increase the gift to charity so that the lower IHT rate of 36% applies to the rest of the estate.
If you would be interested in leaving a Gift to St Peter's please give Matt a call on 07807 529327 or email legacy@stpetershospice.org.
This page is kindly supported by Harold Stephens, experts in later life financial advice.
Visit haroldstephens.co.uk, call 0117 36 36 212, or email office@haroldstephens.co.uk to arrange a relaxed chat about your circumstances or to request a complimentary Inheritance Tax review.
