Tax tip: The importance of reviewing charitable legacies

Where a charitable legacy in a will is at least 10% of the net estate (after deducting the available nil rate band) the inheritance tax rate on the estate is reduced from 40% to 36% (the lower rate). A small increase in a charitable donation could potentially lead to a substantial IHT saving.

Use a ‘formula clause’ to achieve this if this is desired.

Alternatively rather than leaving small charitable donations via the will make the charitable donations during lifetime. The donor will then obtain gift aid relief (potentially saving higher rate income tax) and the charity can recover an extra 25% of the donation from the government. For gifts of listed shares or land and property the value of the asset gifted to charity is deducted from general income.

The IHT position is the same either way because gifts of assets to...