Inheritance Tax Changes
In the Budget on 23rd March 2011 the Chancellor George Osborne indicated that changes would be made to Inheritance Tax law from April of next year to encourage people to use their Wills to make charitable donations.
The announcement was initially billed as a 10% cut in Inheritance Tax for those who left 10% of their estates to Charity. This has since been clarified to mean that leaving 10% of your estate to Charity will result in a cut in the rate of Inheritance Tax from 40% to 36%. (10% of 40% being 4%, so therefore the rate will be cut by 4%).
It remains to be seen how many people will wish to take advantage of this dubious incentive. On the Government’s own figures they expect Charities to receive an extra £300million over a 3 year period because of this change. It is unclear what this figure is based on and it can only really be a shot in the dark.
This is not a change that can be used to protect estates from Inheritance Tax in order to benefit family members. To benefit from the reduced Inheritance Tax rate it will be necessary to leave more to charity than will be saved in tax. However, for those who intended to benefit charities in their Wills in any event, it is a welcome tax relief and other beneficiaries under the Will shall benefit accordingly.
If you wish to discuss this change or any other aspect of Wills or Inheritance Tax planning please do not hesitate to contact our specialist solicitors in the Probate Department.
