Legacies at risk from inheritance tax changes, warns Remember A Charity
Melanie May | 5 April 2017 | News
Changes to inheritance tax could reduce the number of legacies left to charities by 1,200 a year, according to Remember A Charity.
The changes come into effect from 6th April, and see the introduction of a new inheritance tax allowance that Remember A Charity is warning could leave less incentive for people to include a legacy in their Will.
The new main residence nil-rate band of £100,000 is being introduced for domestic residences passed to direct dependents. This allowance is in addition to the current £325,000 inheritance tax threshold. For a couple, it increases the tax-free amount from £650,000 to £850,000: an amount that will rise to £1 million by 1st April 2020 through annual increases.
Inheritance tax is currently charged at 40% on assets above the £325,000 threshold of an estate, with a tax break reducing this rate to 36% for those who leave at least 10% to a charity. However, with the changes, Remember A Charity believes fewer solicitors and Will-writers will raise the option of leaving a legacy, leaving less people aware of this opportunity.
A worst-case scenario estimate by Remember A Charity, which it has based on the latest HMRC statistics on the value of estates suggests that there could be 1,200 fewer people annually leaving charitable gifts as a result of the tax changes.
Rob Cope, director of Remember A Charity, said:
“Tax breaks are a natural entry point for solicitors and Will-writers to raise the option of charitable giving during the Will-writing process. But with the tax changes, our concern is that fewer people will be aware of their charitable options, which will be a real threat to legacy giving.”
Remember A Charity’s latest tracking study of solicitor behaviour released this week and carried out by Future Thinking, shows that the proportion of professional advisers always or sometimes advising clients of the tax benefits of legacy giving during Will-writing has risen to an all-time high of 72%, up from 66% in 2015 and 61% in 2009.
Cope added:
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“It makes it all the more important that we find other ways to put charity front of mind when people are writing a Will. This means engaging more closely with financial advisers and Government, emphasising the importance of legacy giving and the need for greater fiscal incentives like VAT-free charitable Wills.”
Last year, data released by Smee & Ford showed that 2015 was a record year for legacy giving, with 37,261 of the Wills that went to probate in England, Scotland and Wales including a legacy donation, up from 34,908 in 2014.
The full changes, as set out by the Government, can be read on the .Gov site.
About Melanie May
Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via thepurplepim.com.