Will the Budget impact on legacy income?
Simon George | 9 July 2015 | Blogs
In his Budget statement, the Chancellor announced an increase in the level of inheritance tax allowance of £175,000 per person, to add to the current £325,000 allowance, both of which can be transferred to the surviving spouse.
This gives a married couple a combined inheritance tax allowance of £1 million, effectively taking the vast majority out of death duties. The additional allowance is linked to the family home, which is usually the main asset within an estate. So what will the impact of this measure be on charities?
While saving tax is not a major motivation for most people when considering leaving a legacy to charity, for a minority (and especially those who habitually arrange their affairs to minimise their tax liability and enjoy the challenge of avoiding tax wherever possible) it will be a factor. From now on, many of these tax aware people will not have to worry about inheritance tax at all and therefore for them the motivation to save tax on their estate by leaving money to charity has gone.
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This said, there may be a more positive psychological effect of the budget change. If couples suddenly have an allowance of £1 million, they may well feel they can afford to be generous to their favourite causes.
The budget change gives charities an excuse to talk to supporters about inheritance tax, which can be a useful reminder to them of the legacy option. The changes, which come into effect in April 2017, will prompt some people to revise or change their will, so charities need to be stepping up their legacy marketing between now and then to catch those in this position.
Simon George is director of Wootton George Consulting.
Photo: Legacy by Marekuliasz on Shutterstock.com
About Simon George
Simon George, BSc (hons) FInstF (dip) FRSA is a Director of Wootton George Consulting and has been fundraising since 1987. He has special interests in fundraising strategy, legacies and charitable trusts. A longstanding member of the Chartered Institute of Fundraising, he founded its Trusts and Statutory Special Interest Group in 1999 and was also the first Chair of the IoF’s West Midlands region. He has written two e-books on legacies and grant fundraising, published by SPMFundessentials and has achieved the Diploma in Fundraising Management. In 2010 he was made a Fellow of the Institute of Fundraising. Today he manages a team of 20 fundraising consultants around the UK.