Sounds good doesn’t it? Let us look at this in more detail.

In late March, George Osborne, Chancellor of the Exchequer, announced the 2011 budget. There were a number of measures introduced, primarily to reduce the Country’s deficit, but there were also a number of measures aimed at increasing charitable gifts.

From April 2012 the rate of Inheritance Tax (IHT) will be reduced to 36% for estates leaving 10% or more to charity (in effect this is a 10% reduction in IHT). 

For all other estates the rate will remain at 40% and the Nil Rate Band (the tax free allowance) will continue to be frozen at £325,000 until April 2015 after which the Consumer Price Index (CPI) will be used as the default indexation assumption (the basis on which increases to the Nil Rate Band are calculated). 

The move to reduce the rate of Inheritance Tax where a donation of 10% or more is made to charity is designed to increase charitable giving – charities play an important role in the ‘Big Society’. The question is whether the Budget 2011 goes far enough to encourage charitable giving through legacies. Time will tell.

To find out how you could reduce your Inheritance Tax bill by leaving a percentage of your estate to Charity, or for advice on any other tax related matter, simply contact us and we’ll make the necessary arrangements.