We recommend that you use a solicitor to draw up your Will.
Here is our suggested wording for your legacy:
- I give free of tax to Newbury Cancer Care (registered charity number 1157796) the sum of £[amount]
- If before my death or after my death but before my executors have given effect to the gift the above-named charity has changed its name or amalgamated with any other body or transferred all its assets to any other body then my executors shall give effect to the gift as if it were a gift to the body in its changed name or to the body which results from the amalgamation or to the body to which the assets have been transferred
- The receipt of anyone purporting to be the treasurer or other proper officer of any charitable or other body to which any gift is made by this Will shall be a good discharge to my executors for the gift
Are there any Inheritance Tax benefits if I leave a legacy to charity?
Your legacy to Newbury Cancer Care will be exempt from Inheritance Tax.
A special reduced rate of Inheritance Tax is applicable to the remainder of your estate, if you have given at least 10% of your taxable estate to a UK registered charity or charities.
The “nil rate band” allowance (NRB) is currently £325,000. The excess above this allowance is normally subject to inheritance tax at 40% (assuming no other allowances and exemptions are available). But if you leave at least 10% of the excess to charity, then the rate of inheritance tax drops to 36%.
Illustration of 10% to charity legacy
Example: AB dies leaving an estate of £1,000,000 (assuming that the full NRB allowance of £325,000 is available, but no other allowances or exemptions). The table below shows the reduction in inheritance tax where a 10% gift is made to charity and qualifies for the reduced rate of inheritance tax. For comparison, the illustration also shows the effect of a 5% charity legacy, which does not qualify for the reduced tax rate.
No gift to charity | 5% gift to charity | 10% gift to charity | |
Charity gift | 0 | 33,750 | 67,500 |
Inheritance tax due | 270,000 | 256,500 | 218,700 |
Amount inherited by the family | 730,000 | 709,750 | 713,800 |
In the case of the 10% gift to charity, 76% of the charity gift would otherwise have gone to HM Revenue & Customs (compared to no gift to charity), and the amount inherited by the family is reduced by approximately 2%.