Reduced rate Inheritance Tax

Don’t give it to the taxman! Give it to your favourite cause.

At the end of 2016, the Snowdonia Society received several generous legacies from former members and friends, for which we were extremely grateful.

But did you know that the inheritance tax rate on an estate is reduced from 40% to 36%, if 10% of the relevant part of the estate is bequeathed to charity?

Varying a will after someone has died

What’s more, if you are thinking of making a charity donation from a bequest you have recently received or are about to receive, you can vary the will up to 2 years after your loved-one has died, in order to make use of the this reduced rate of inheritance tax. By forfeiting a small amount of your benefit, your chosen charity could receive significantly more.

Read the following example story…

Anita forfeits £4,800 and a charity receives £20,000

Reading her father’s will after he died, Anita was surprised that there were no charity bequests. Her father had supported wildlife and conservation causes all his life and had encouraged Anita to do the same. She was also surprised to discover Inheritance Tax (IHT) would be due because of inflation in house values.

Anita, the sole beneficiary, mentioned the lack of charitable bequests to her solicitor, adding that she would make her own donation from her inheritance.

Inheritance tax rate reduced to 36%

“I can suggest a better option,” said the solicitor. “If you vary the will to give 10% of the taxable portion of the estate to charity, you pay only 36% IHT instead of 40%. Your inheritance will be marginally less, but a charity will gain considerably more.”

Given the value of the estate was expected to be £525,000 he explained that by forfeiting only £4,800 of her benefit, her chosen charity could receive £20,000*. Having intended to give £5,000 to a charity from her inheritance, Anita realised this would be a far more effective way of giving, and decided to make a charitable variation on the will.

Of course, the same reduced rate IHT would have applied if her father had given at least 10% of his net estate to charity.

If you are likely to inherit, if you have inherited recently, or if you are intending to write your will, why not take advantage of the reduced rate IHT and make a huge difference to a cause you care about? Likewise, if you have already written your will, you can add a deed of variation to the same effect.

More information

Inheritance Tax reduced rate calculator
Post death charitable variation

* Conditions apply; it is recommended that you consult a solicitor.
Anita is not a real person and this story is for illustrative purposes only.


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