A bonus from the tax­man

Your legacy just be­came more af­ford­able

The Jewish Chronicle - JC Magazine - - Ujia -

IS­RAEL IS part of our jour­ney as Jewish peo­ple, past, present and fu­ture and it is our re­spon­si­bil­ity as Bri­tish Jews to sup­port vul­ner­a­ble peo­ple in Is­rael, as well as to con­nect young peo­ple to Is­rael. Like many other char­i­ties, UJIA re­lies on lega­cies to fund its projects in Is­rael and the UK. That is why your sup­port through your will could as­sure an en­dur­ing legacy for Is­rael, de­liv­ered by UJIA through its life-chang­ing pro­grammes. And the tim­ing could not be bet­ter to leave a legacy, as new leg­is­la­tion al­lows you to do so largely at the tax­man’s ex­pense.

SO HOW DOES IT WORK?

For in­her­i­tance tax, each of us has a per­sonal tax-free al­lowance (“nil­rate band”) of £325,000. Above this, in­her­i­tance tax is levied on the tax­able part of the es­tate at a flat rate of 40 per cent. Take the ex­am­ple of Betty Gold­stone, a widow with two chil­dren. If she leaves £425,000 to her fam­ily, the £100,000 tax­able part will be worth just £60,000 to them, af­ter the tax­man has taken £40,000. But lega­cies to char­ity are tax-free. So leav­ing part of that ex­cess to char­ity re­duces the tax bill, though her fam­ily will have to forego a small part too. A £10,000 legacy to UJIA would cost her fam­ily £6,000 and the tax­man £4,000.

WHAT’S CHANGED?

Since April 2012, the government — en­cour­ag­ing us all to leave char­ity lega­cies — has been of­fer­ing a dis­count on the rate of in­her­i­tance tax if we leave 10 per cent or more of the tax­able es­tate to char­ity. So not only is the amount of the char­ity legacy de­ducted, the tax rate is re­duced from 40 to 36 per cent. This might not sound very much, but the ef­fect can be star­tling.

If Betty leaves £10,000 to UJIA, the tax rate on the re­main­ing £90,000 will now be 36 per cent. This gives the tax­man just £32,400 (£7,600 less than be­fore). Her chil­dren now get £57,600, so Betty has to be pre­pared for them to give up £2,400 in or­der for UJIA to ben­e­fit by £10,000 — just 24 per cent. The other 76 per cent comes from the tax­man (see ta­ble).

Now is the time to leave a char­i­ta­ble legacy — and to do so largely at the ex­pense of the tax­man. And just think how that legacy will cre­ate a last­ing im­pact on the projects that UJIA is de­liv­er­ing to the youth in north­ern Is­rael and in con­nect­ing Bri­tish Jewish youth to Is­rael.

The true cost of Betty’s char­ity legacy

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