Legacy10 is an independent campaign, launched by Roland Rudd in November 2011, with the aim of encouraging charitable giving in the United Kingdom.
Currently, three quarters of the population give something to charity every year but only 7% of that group leave a gift to charity in their will. Even at this level, legacies provide a vital source of funding to numerous organisations. Indeed, many charitable causes were established as the result of a legacy donation. However, if more of us were to make provisions for the causes we hold most dear, the benefits would be enormous. The amendment to inheritance tax presents us with an ideal opportunity to collectively make this change.
The calculator below illustrates how the change in inheritance tax will affect an estate making a donation against no donation.
Change to Inheritance Tax
The Legacy10 campaign dovetails with the Government’s change in Inheritance Tax (IHT).
From 6 April 2012, any estate which leaves at least 10% of its taxable wealth to a charitable cause will be able to take advantage of a reduced rate in IHT, from its normal level of 40% down to 36%. What this means in practice is the benefit to a charitable cause will be four times greater than the cost to the estates beneficiary, as HMRC will shoulder the burden of 76 pence for every pound donated, whereas the estate pays only 24 pence.
For those people who are already planning to leave a legacy, the new rules result in a breakeven level of 4% (of taxable wealth) – ie there is no greater cost to the beneficiary if the estate donates 4% or 10% of the taxable wealth to charity.