How UK legacy charity donations offer a personal reward too
In the UK gifts to charities in wills currently contribute a respectable £2bn per year to the sector. In fact the World Giving Index recognises the Brits as the most charitable developed nation in the world, 75% of UK citizens give something to charity monthly.
Remember a Charity Week is actively encouraging the UK to go further and remember to gift to our favourite charities in our wills as well. You can rest in peace knowing you have done something charitable with your estate and if you make a significant donation you can also reduce you tax liability.
Yes, you read that right. Should you donate 10% or more of your estate to a registered charity, your inheritance tax liability on your estate over the £325,000 threshold will be reduced from 40% to 36%. Let’s look at an example.
If you were a single adult with an estate worth £425,000, after utilising your Nil Rate Band threshold, you have a tax liability of £100,000 @ 40%. You owe the tax man £40,000.
However, if you make a gift of £10,000 to charity, you will qualify for a reduced rate of Inheritance Tax of 36% instead of 40%. This will be paid on the £90,000 that’s liable to Inheritance Tax (£100,000 from the original example, minus £10,000 to charity).
This means your estate will pay Inheritance Tax of £32,400 (36% of £90,000).
This does mean that your beneficiaries would receive less, but if you are keen to support a charity, this may be something to consider.
The annual £2bn charities currently raise from legacies is only 7.3% of the amount generated by the public. Imagine how much more of a difference we could all make by leaving just a small bequest in our will?
For further information, most large charities have websites offering advice and assistance on legacies and donations and I am always happy to help clients with charitable giving.