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new inheritance tax charity relief

By Kevin Russell | 23 May 2012 | Comments (2)

A reminder that the new reduced rate of Inheritance Tax is now in force. It applies to deaths occurring after 5 April 2012. Where more than 10% of the net estate is given to charity, the rate of tax applying to the rest of the estate is reduced from 40% to 36%. Charitable gifts are of course tax exempt.


There are two main actions: First, consider whether you should be giving 10% or more to charity in your own Will. Second, if you are a beneficiary under the Will of someone who has died since April, you may wish to consider entering into a Deed of Variation to make or increase the charitable gifts in order to qualify for the lower rate.


Are you taking advantage of this reduced rate? Leave your comments and questions below.

Posted by Kevin Russell

Our Legal Eagle guru and Stewardship's Technical Director, Kevin constantly has his finger on the pulse of all things tax and charity law-related. His briefing papers for charities, churches and individuals are an invaluable resource on everything from VAT to Gift Aid. 



May 25, 2012 10:44 AM
There is an inconsistency/lack of clarity between the first and second paragraphs. Does this new rule apply 'AT and above 10%'? Or only 'ABOVE 10%'?
Thank you.

Kevin Russell

May 25, 2012 12:02 PM
Thank you, Keith, for your question.

The Finance Bill refers to "at least 10%", so the test is of 10% or more. My apologies for not being more precise.

It is quite unlikely that a charitable gift in an estate will fall exactly on the 10% mark unless it is carefully contrived to be so, using a post death deed of variation. So, in practice, the distinction is unlikely to be an issue.

Rather more importantly, the calculations involved are not necessarily as straightforward as one may, at first glance, imagine. For example, the 'net estate' needs to be defined (the legislation actually refers to a 'Baseline amount'), and there is a separate 'Baseline amount' for the different components of the Estate. The components are: property passing by the rules of survivorship, settled property and the remainder.

We will cover this detail in our Finance Bill Briefing Paper, or possibly, in a separate Briefing Paper on the Inheritance Tax Relief for gifts to charities.

Readers that are already facing these questions because they are dealing with an estate of a person who has died since 6th April 2012, are strongly advised to take professional advice before proceeding.

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