When one thinks about beneficiaries in a Will, close friends and family are usually the first people you think about. However, it is also important to consider including charitable organisations who could also benefit from your legacy. This could be a charity you have supported during your lifetime, or a hospice which is an institution to yourself and your family.
In the 2011 Budget speech the Chancellor said:-
‘We will introduce from April 2012 this major change to our inheritance tax system:if you leave 10% or more of your estate to charity ,the Government will take 10% off your inheritance tax rate.Let us be clear no beneficiaries will be better off as a result of this policy –just the Charities to the tune of £300 million.I want to make giving 10% of your legacy to charity the new norm in our country’.
How this would work can be seen from the following example:-
An estate is worth £850000.The Nil Rate Band is £325000.The estate net of the Nil Rate Band is £525000.10% will be £52500.
If nothing was left to charity IHT would be 40% £525000 = £210000.The Beneficiaries get £640000.
If the Will had left £52500 to charity under the new regime IHT will be calculated as follows:-
Value of estate £850000
Less left to charity £ 525000
Balance £797500
Less IHT £170000
Net balance £627400
As opposed to £640000 if nothing left to charity
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