The tax benefits of giving to charity
Leaving a part or your entire estate to charity can reduce or eliminate the Inheritance Tax (IHT) liability on it.
If you leave something to charity in your will, then it won’t count towards the total taxable value of your estate.
If you therefore have an estate over the IHT threshold (otherwise called the nil rate band or nrb) and you give the excess over the nrb to charity, leaving the nil rate band value or less in your estate then there will be no IHT to pay
Similarly no IHT if you leave your total estate to charity
Leaving part of your estate to charity is called a ‘charitable legacy’.
You can also cut the Inheritance Tax rate on the rest of your estate from 40% to 36%, if you leave at least 10% of your ‘net estate’ to a charity.
There’s nothing to stop you from giving to charity right away.
You can make a cash donation or give them anything you own and it won’t be counted as part of your estate when you die.
This could cut or even eliminate any Inheritance Tax there is to pay upon death.
You can also benefit from some relief from certain taxes such as Income Tax, when you donate to a charity while you’re still alive.
If you want to give a charity something in your will, you can leave it either as:
A fixed amount of money, known as a ‘pecuniary legacy’
A share of what’s left of your estate once all costs and other legacies are paid out, known as a ‘residuary legacy’.