Inheritance Tax & Gifts To Charity

Posted on: May 2nd, 2012

Everyone in the UK has a ‘Nil Rate Band’ Allowance for Inheritance Tax of £325,000.  This means that on death you are entitled to gift £325,000 free of inheritance tax.  If your estate were to exceed this at the date of your death then inheritance tax would be payable at 40% on anything above £325,000.

In the recent budget there were no changes in the Nil Rate Band threshold and it is now set to remain until the 2014-15 tax year.

Spouses and civil partners are still able to transfer their Nil Rate Band threshold to their surviving partner for use on the second death, therefore being able to gift up to £650,000 free of inheritance tax.

The Government did announce a change in the recent budget whereby individuals can now reduce the inheritance tax rate from 40% to 36% by making gifts to charity.

Gifts to charity are not subject to inheritance tax. If your estate is taxable, any individual who includes a charitable legacy in their Will of at least 10% of their net taxable estate will benefit from a 36% rate of inheritance tax.

It is now the case case that if someone has died, and made a gift of between 4-9% of their net taxable estate to charity, it is advisable that the family enter into a deed of variation to increase the percentage to 10%. HMRC will pay the whole increase in the gift and the remainder of the estate will benefit from the 36% tax.

At the Head Partnership Solicitors our Personal Affairs department will be able to discuss inheritance tax, charitable gifts and the effect on your estate and including provisions within your Will.

For more information or to book an appointment please contact Melissa Reeds on 0118 9756622 / 01491 570900 or at melissa@thpsolicitors.co.uk.