A bonus from the taxman
Your legacy just became more affordable
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.
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