Wealthy estates are to receive an inheritance tax rebate if they leave a legacy to charity.
Under Chancellor George Osborne’s 2011 Budget, estates that leave 10% or more to a charity will receive a 10% reduction in the rate payable to the Treasury.
This means that the inheritance tax due will be reduced from 40% to 36% of the estate. Currently, no inheritance tax is due on bequests to charity but the rest of the estate is taxed at 40%.
Reforms have also been introduced to Gift Aid, which can now be claimed on small donations up to £5,000 per year per charity without the need for the donor to fill out any forms. Gift Aid benefit limits are to be increased from £500 to £2,500.
Julian Chadwick, partner, Thomas Eggar LLP, says: “The government is committed to the Big Society, a crucial part of which is the further expansion of the charity and not for profit sector through philanthropic giving.
“There is a welcome reduction in the rate of IHT on estates where more 10% goes to charity. I envisage further measures over the next few years to boost philanthropic giving.”
Amanda Berridge, partner, PwC, said the changes benefit everyone from “those who were put off from donating because they simply weren’t in the mood to fill in forms, to the charities which will have lower administration costs, less chance of being picked up after the event in a gift aid audit, and will be able to offer their more generous donors some thank you hospitality without worrying about losing their gift aid relief”.
