If you make a gift to charity in your will, there won’t be any inheritance tax to pay on it, so you’ll not only be able to help causes close to your heart, but it can also help keep your tax bills down.
If you’re planning to leave a substantial charitable gift, which is equivalent to 10% or more of your estate, this will reduce how much inheritance tax is charged on the remainder of your estate, as it reduces your payable rate from 40% to 36%.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Legacies are a lifeline for charities, and by leaving money in your will, you won’t just get a warm glow from helping a good cause, you’ll also get a boost from knowing you could cut your inheritance tax bill too. There are just certain steps you need to take to avoid the pitfalls of legacy giving.
“If you leave a fixed sum, your circumstances could change, so it makes up a much more or less significant part of your estate when you die. So, for example, you might have an estate of £200,000 and write a will leaving £10,000 to charity (5%). Then you go into a care home, and spend £150,000 of your estate. Suddenly you’re leaving 20% of your estate to charity. One way to deal with this is to lay out specific bequests to family and leave the remainder to charity. Alternatively, you can specify a specific percentage of your estate goes to the charity.”