Pay less inheritance tax

by Tax Faculty Team on 13.06.2011 13:03

Leave a charitable legacy and pay less IHT on the rest


Following the announcement in this year’s Budget, HMRC has published a consultation on the policy detail and implementation of a lower rate of Inheritance Tax where people leave a charitable legacy of 10% or more of their estate when they die. This will mean an IHT rate of 36% rather than the usual 40% on the chargeable estate.


The 10% charitable legacy will be based on the value of the estate after deducting IHT reliefs, exemptions and the nil rate band. The change is expected to apply for deaths on or after 6 April 2012


The consultation runs until 31 August 2011. Please send any comments for consideration in the Tax Faculty’s response to paula.clemett@icaew.com before 31 July 2011.


This is one of a parcel of policy measures designed to encourage philanthropic and charitable giving across the whole of society and at all life stages. The other proposals are:


  • Under the new Gift Aid Small Donations Scheme, to be introduced in April 2013, the Government will pay charities a top up equivalent to Gift Aid on up to £5,000 of small donations of money made without a Gift Aid declaration. This means that donations made by people who do not pay tax will be able to benefit from a top up, supporting smaller charities in particular;


  • From April 2011 the upper limit on benefits that charities may provide to Gift Aid donors will be increased from £500 to £2,500;


  • The Government will be consulting in summer 2011 on a scheme to provide a tax reduction to people who, during their lifetime, donate works of art or historical objects of pre-eminent importance to the nation.


Other charity news


Minutes from the Charity Tax Forum have now been published. This forum is the external stakeholder forum where charities, HMRC and HM Treasury meet to discuss new policy and tax measures.