Thanks to increasing house prices, more and more middle earners will have to face paying inheritance tax (IHT). However, many people may not be aware that they could leave more behind for their loved ones, by taking advantage of charity rules.

When savers decide to donate more than a tenth of their estate to charity, they will be able to leave more behind for the beneficiaries of their will, than those who are less charitable.

How does the  charity rule work?

When it comes to IHT, the standard rate is 40%, which is charged on the part of an estate that falls above the threshold of £325,000 – but there is a way you can reduce this tax rate.

A lot of people plan to leave a sum of their estate behind to charity, and no IHT is due when it comes to donations. However, by gifting a charity over 10% of your wealth, the Government will award you with a bonus, which will see the rest of your estate be subject to a reduced inheritance tax rate of 36%.

So how much more can I leave behind?

By taking advantage of this legacy rule and reducing the IHT rate on your estate from 40% to 36%, you’ll be able to leave significantly more behind to loved ones.

For example:

Using these two examples, it shows that there would be a difference of £8,250 more that could be left behind for family and loved ones, through donating at least 10% to good causes, once the taxman and charity have each taken their shares.

Beneficial for you and for charities

This rule will allow you to leave more for charitable causes, without worrying that your loved ones will be missing out, and the tax break is also giving charities a beneficial boost.

Your family would actually be no worse off if you left 10% of your estate to charity than if you decided to donate 4%, but charities could see thousands of pounds more in donations.

What to do if you plan on leaving money to charity

So, if you plan to leave a charitable legacy in your will, it’s best to keep these points in mind:

Further information

Here at Get Probate, we can help you deal with matters relating to Inheritance Tax and Probate (for getting the Grant of Probate and the Full Probate Service).

Our authorised and regulated non-contentious probate practitioners are here for you; and our fees are very reasonable.

For more details, contact us on 0161 907 4044 or