You may wish to leave a gift to the church in your will. This has Inheritance Tax (IHT) benefits – not only is your gift exempt, but, since April 2012, if you give >10% of your estate to one or more charitable causes, the inheritance tax rate is reduced by 10% (from 40% to 36%) on the remaining estate.
How it works
The example below shows how this tax concession works in practice using a hypothetical gross estate of £1million.
We are using an estate of £1 million to keep the sums simple. Whilst £1million sounds like an awful lot of money, with the value of property nowadays, many of us may be more asset rich than we imagine!
The net result of a 10% donation means the estate’s beneficiary foregoes £16,200 but the charity benefits by £67,500.
The benefit to charitable cause(s) is four times greater than the cost to an estate’s beneficiary
| No donation | With a 10% Legacy Donation | |
|---|---|---|
| Gross Estate | £1,000,000 | £1,000,000 |
| Less Nil Rate Band | £325,000 | £325,000 |
| Net estate on which the donation is calculated | £675,000 | £675,000 |
| Charitable Donation | – | £67,500 (at 10%) |
| Taxable Estate | £675,000 | £607,500 |
| Less inheritance tax | £270,000 (at 40%) | £218,700 (at 36%) |
| Remaining Estate | £730,000 | £713,800 (only £16,200 less than the “no donation” scenario) |
