Inheritance tax reduction through charitable giving
With the government considering a u-turn on its plans to limit tax relief on large charity donations giving to charity can help take the sting out of paying inheritance tax (IHT).
Individuals considering their financial planning arrangements could benefit from a reduced rate of IHT if they set aside money for charity in their will.
IHT will be charged at 36 per cent rather than 40 per cent when 10 per cent or more of a net estate is left to charity. IHT is charged when an individual dies and is based on the value of the total wealth left to others. The first £325,000 of what is left is tax-free. On top of this, bequests to charities are also exempt.
For many, leaving something for the next generation is a priority. Whilst the amount of money paid to beneficiaries is reduced, the key benefit is that less IHT is paid overall and that individuals can use their estate to support worthy causes rather than the taxman.
Careful planning as part of your financial planning strategy could help to reduce the likely IHT bill overall. This may provide an extra incentive for people to use their estate to support worthy causes.
Keith Pressler, associate director