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Legal Updates

New Inheritance Tax Relief for charitable legacies in Wills

04 October 2012 #Real Estate


From 6 April 2012, a new inheritance tax relief is available.

Where an individual leaves 10% or more of their net estate to charity, the estate will benefit from a 10% reduction in any inheritance tax due. So, an estate that would otherwise be charged inheritance tax at 40%, will now be charged at 36%.

The illustration below show the effect of this new relief:

Mr Smith leaves an estate of £500,000. He has two grown up children. His wife predeceased him but used up her inheritance tax allowance (nil rate band) in gifts to her children.

 

Scenario A

Scenario B

Estate (£)

500,000

500,000

Gift of 10% of net estate to charity (£)

Nil

17,500

Inheritance Tax due (£)

70,000

56,700

Left to children (£)

430,000

425,800

In Scenario A, Mr Smith makes no gift to charity in his Will. He pays £70,000 in inheritance tax and his children receive the remainder.

In Scenario B, Mr Smith takes advantage of the new relief. As a result of which his children receive £2,100 less each but his favourite charity receives a gift of £17,500 and the taxman gets £13,300 less!

The amount of the gift to charity is calculated on the net figure for the estate. The net figure is calculated by taking the gross estate, in this case £500,000, and deducting any other inheritance tax reliefs available, in this case jus the nil rate band (£325,000).

It is hoped that this new relief will encourage people to make a charitable gift in their Will.

Clarkslegal, specialist Real Estate lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Real Estate matter please contact Clarkslegal's real estate team by email at realestate@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Simon Berry

Simon Berry
Partner

E: sberry@clarkslegal.com
T: 0118 960 4661
M: 07920 144 780

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