The Daily Telegraph - Money

Hate the death tax? Time to give to charity

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The number of people leaving tax-free gifts to charities in their will has soared as booming house prices and coronaviru­s fatalities result in more estates being caught by inheritanc­e tax.

From 2019 to 2020, there was an increase of almost two thirds (61pc) in charitable bequests in final wishes, data from will-writers Co-op showed. Close to a third of all wills drafted last year included a gift to charity and more than 100 people made donations via wills every day, the firm said.

All gifts to charitable causes are taxfree. However, someone can cut the inheritanc­e tax rate paid by their estate by donating more than a tenth of their worldly possession­s to charity. This discounts the typical 40pc rate to 36pc on assets over the £325,000 tax-free threshold.

As an example, if your taxable estate is worth £250,000, you will be faced with an IHT bill of £100,000, leaving your family with £150,000. By giving away 10pc – £25,000 – to a registered charity, the tax bill will drop to £81,000, leaving your family with £ 144,000 following the donation. Although heirs lose £ 6,000, the charity is £ 25,000 better off.

Thousands more Britons are expected to pay the death levy thanks to rising asset values, higher death rates and the frozen tax-free allowance. More than 36,000 estates a year will pay the levy by 2026, up from fewer than 25,000 over the past three years, according to official estimates. This will push the annual tax take to £6.6bn by 2026, up from £5.1bn last year.

The five-year freeze in the IHT allowance announced at the Budget will net the Government almost £1bn in additional revenue. The main £325,000 taxfree allowance has not increased since 2009, while house prices have risen more than 50pc and are now growing at their fastest rate in five years.

The most popular charities chosen by Britons were those focused on fighting, curing and researchin­g cancer.

Co-op’s James Antoniou said: “Deciding who inherits your money or part of your estate is a highly personal matter. Making people aware of their options is the key to ensuring wishes are clearly specified in their will.”

Previous research from Remember a Charity showed more Britons were leaving something behind to charities, with the number rising by more than a third in the past decade.

 ??  ?? Charities fighting, curing and researchin­g cancer were the most gifted to
Charities fighting, curing and researchin­g cancer were the most gifted to

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