You can’t take it with you
The tax-free threshold for inheritance tax has been fixed at £325,000 until 2015. More estates are likely to be hit with a 40% tax charge if property and share values recover. As part of the Big Society idea, George Osborne announced in the Budget that there would be an IHT incentive for people to leave more of their estates to charity.
There’s always been an exemption for anything you give to charity in your will – it gets knocked off the estate before you calculate the 40% due. The new rule will cut the rate to 36% if you give at least 10% of your estate to charity. This makes for some complicated calculations, but if you are intending to make substantial gifts to charity anyway, it’ll be worth revisiting your will to make sure that the 10% test is passed. The cut in the rate means that the rest of the beneficiaries also get more – only the taxman misses out.
If you want to discuss how this works for your will, we can advise you. We can also explain the incentives for income tax and CGT that are available for lifetime giving.