Legal News | 15.10.20

The gift that gives back

Whether you’re an elite marathon participant and took part in the 2020 London Marathon, or you’re an armchair supporter and watched the annual race from the comfort of your own home with your favourite snacks in hand, many of us have somehow contributed to a charity in need during our lifetime.

But how many of us have considered leaving a gift to our preferred charity after we die?

For obvious reasons this year, charities are relying on our generosity more than ever and Covid-19 has hit fundraising activities hard. Additionally, the financial effects of a global pandemic mean that many of us do not have spare cash to give away and charities are relying on legacies in Wills to help them survive.

Apart from the undeniable benefit of contributing to a great cause, if you leave a gift to a charity* in your Will, you could also reduce your estate’s total Inheritance Tax (IHT) bill. Currently, the proportion of an estate valued over the IHT threshold available to your estate is subject to a 40% Inheritance Tax rate; however, legacies to charities do not count towards the taxable value of your estate and would therefore not be subject to IHT.

In addition, if you are feeling particularly generous, you can reduce your total estate IHT rate from 40% to 36% if you leave more than 10% of your net estate to charity.

As it is often hard to know what the value of your estate will be for Inheritance Tax purposes, a formula clause can be written into your Will. A clause written as a formula can ensure that the correct value of your estate is left to charity in order to take advantage of the 10% rule.

And it doesn’t stop there… there are no Capital Gains Tax implications if you gift land, property or shares to charity.

So if your running shoes are still hidden away in a dust-covered box and you would rather receive a box of chocolates than a gold medal, get in touch with your usual Wansbroughs contact or email wealth@wansbroughs.com to discuss making a new Will or reviewing your existing Will to include a charitable legacy.

• a gift to a charity that is registered with the Charity Commission, with a registered charity number, will satisfy HMRC’s definition of a charity. Gifts to charities in the EU who are registered with that country’s charity regulator are also exempt from Inheritance Tax. Gifts to political parties who are of adequate standing and, in some circumstances, gifts to parish churches, cathedrals and Parochial Church Councils are also Inheritance Tax exempt.