Many people think about leaving gifts to charity within their wills.

This can be for many reasons, such as the individual being affected by the work of the charity in some way, or simply wishing to benefit a charitable organisation.

Making a gift to charity can also help to reduce, or in some cases eliminate your inheritance tax bill.

If you leave a charitable legacy in your will, then it won’t count towards the total taxable value of your estate.

For example, if you are unmarried and leave a net estate valued at £350,000 then inheritance tax is likely to be payable at 40% on anything over £325,000, the current nil rate band.  If you left £25,000 to charity, your net estate would reduce to £325,000 and no inheritance tax would be payable.

If you leave at least 10% of your net estate to a charity, then you can reduce the rate of inheritance tax payable on your estate from 40% to 36%.

For example, if you leave a net estate valued at £500,000, normally inheritance tax would be due at 40% on the £175,000 (£500,000 – £325,000 = £175,000). That means you’d have to pay £70,000 in inheritance tax.

However, if you left 10% of the estate (£50,000) to charity, then the value would reduce to £450,000, and inheritance tax would be due on the £125,000 above the nil rate band, but at a reduced rate of 36%. This means that you’d have to pay £45,000 inheritance tax.

You are of course able to benefit a charity at any time, and not just in your will.

You can make a cash donation or give them anything you own and it won’t be counted as part of your estate when you die, whereas most other cash gifts made in the 7 years leading up to your death will still be considered part of your estate, subject to some limited exemptions.

This could reduce or even eliminate any inheritance tax there is to pay upon death.

You can also benefit from some relief from certain taxes such as income tax, when you donate to a charity while you’re still alive.

The rules on how to work out what you can give away to charity to secure the lower tax rate aren’t always straightforward, so it is always a good idea to obtain legal advice if this is something you are considering.

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