Over the past decade, one million people have donated to charities helping to reduce the amount of tax due on their estates according to a recent article in the Daily Telegraph.
Against a backdrop of mounting death duties, more people than ever before have chosen to make tax-free donations this way, with some 100,000 posthumous donations on average, which raised £3bn last year alone, according to the firm Smee & Ford, which notifies charities when money has been left to them.
Bequests left to good causes rose by almost a third in the past 20 years. The causes that saw the greatest increases in the number of donations included medical welfare and research, rescue services, hospices, and sports and creation charities.
Gifts exempt from inheritance tax
Charity gifts are 100 percent exempt from inheritance tax, which is charged at 40 percent on estates that are worth more than £325,000. In addition, if someone donates more than one-tenth of their total estate to charities after they die, this triggers an extra tax relief, where the rate at which the outstanding tax is charged is reduced to 36 percent.
In the next few years, thousands of more families will be liable to pay inheritance tax, thanks to the five year tax freeze in tax breaks announced in the March Budget. Coronavirus deaths and the huge increase in house prices will result in the government bringing in an extra £1bn over that time, with the overall tax income reaching a record £6bn by the end of the tax year 2021-22, up from £5.4 billion in 2020-21.
Rob Cope of Remember a Charity, a non-profit organisation that campaigns to persuade people to leave money to charities in their Wills, said such gifts enabled people to make “a considerable difference”, supporting charitable work and saving their estates from taxation.
Six percent leave gifts
According to the organisation, at present, 6 percent of people leave a gift to charity in their Will, but if this increased to 10 percent then it could generate another £1 billion for good causes every year.
Talking about the growth in legacy giving in general, he said: “We’re continuing to see growth in legacy giving over the long term, which is fantastic news for charities across the sector.
“It’s clear that there’s a real appetite for supporters to do something meaningful for good causes at the end of their lives, and that charities are communicating legacies well; creatively and sensitively, demonstrating how important they are in funding vital services.
“Legacy growth is being driven not only by charities communicating their own legacy case for support but their willingness to work together to grow the market. Having a proactive and collaborative approach to legacies is critical if the sector is to succeed in normalising legacy giving and increasing the income pot so that there every charity can benefit.”
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