Yes, gifts to charities are tax efficient. If your estate is going to attract inheritance tax, any gift you leave to Cure Parkinson’s will be deducted from your estate before any tax liability is calculated. So, if your estate is £20,000 over the amount allowed as tax-free, and you leave Cure Parkinson’s £2,000, then inheritance tax will only be payable on £18,000.
There are other advantages too, as outlined below. This is not advice, we strongly recommend that you talk to a qualified solicitor before making any decisions about your Will.
By leaving at least 10% of the ‘net value’* of your estate to charity, you can cut the Inheritance Tax (IHT) rate of your estate from 40% to 36%.
Please speak to your solicitor who will be able to provide you with advice specific to your circumstances. Currently the threshold for IHT is £325,000 for individuals. Married couples and members of civil partnerships can transfer any unused allowance to a spouse or partner so that they can leave up to £650,000*** before death duties are due.
*The net value of an estate is the total value of all the assets after deducting: debts and liabilities; reliefs; exemptions, e.g. anything left to a husband, wife or civil partner; anything below the Inheritance Tax threshold of £325,000 (known as the ‘nil rate band’)
**If you are the beneficiary of an estate that has not taken advantage of the full amount available as 10% charitable gift and the tax advantages this can confer, then it may be possible to vary the terms of the Will in order to do so. The precise impact this will have on the amount of any tax paid depends on the circumstances and you should seek professional advice on both this and what needs to be done to make a variation to a Will.
***The £650,000 may increase to £1m if your estate qualifies for a ‘main residence allowance’. You can read more about this here.