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Why was there an increase in charitable gifts last year?

2022 saw a higher number of charitable gifts left in Wills, but why is this and how could leaving charitable gifts be beneficial?

What do the figures show?

There was a total of £21.3 billion left in Wills through charitable gifts last year.

In 2022, the number of individual gifts in charitable estates was the highest number ever recorded in England and Wales.

Furthermore, 31 per cent of gifts were worth over half a million pounds. There was also a further 22 per cent of gifts with values between £100,000 – £250,000.

Many charities recognise this income as a vital source of funding to continue their work.

How can charitable gifts reduce Inheritance Tax (IHT)?

If you are worried about your IHT obligations, gifting could help you to reduce your tax.

Gifts to charity are exempt from IHT liabilities regardless of whether they are made in your lifetime or in your Will.

If 10 per cent or more of the estate passes to charity, a reduced rate of 36 per cent will apply to the entire estate above the tax threshold instead of the standard IHT rate of 40 per cent.

To determine whether a charitable gift qualifies the estate for the lower rate of IHT, a figure known as the baseline is used.

This figure is the value of an estate after the nil-rate band and any other exemptions and reliefs have been deducted, but before the gift to charity has been made.

As an example, if the estate is worth £1.5 million the baseline is:

£1.5 million – £325,000 (nil-rate band) – £175,000 (residence nil-rate band) = £1 million.

In this case, for the estate to qualify for the lower rate of IHT, a gift of at least £100,000 must be made to charity, either through a Will or during your lifetime.

If you need advice on Wills and gifting, contact us today for more advice.

Rachel Blackburn

Head of Wills, Probate and Older Client Services

I joined Mander Hadley’s Wills, Probate and Older Client Services Team in 2018.I specialise in the preparation of Wills, Probate and estate administration, trusts and trust administration and Lasting Powers of Attorney. I also have experience of care fee planning and appeals of Continuing Health Care decisions.

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