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Higher IHT threshold will harm charities, law firm warns

The current IHT system and nil-rate band encourages donations to charities

2 December 2014

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The Law firm, Moore Blatch, has warned that if the government decides to increase the inheritance tax (IHT) nil-rate band from £325,000 to the anticipated £1m threshold, charities may be one of the worst affected.

The current system encourages donations to charities as they are exempt from IHT, and those wanting to reduce the size of their estate below the £325,000 nil-rate band often donate to charities.

Additionally if a person leaves 10 percent of their estate to a charity, any IHT due on the rest of their estate will be subject to 36 per cent instead of the standard 40 per cent tax rate.

Carla Brown, partner and head of wills, tax and trusts at Moore Blatch commented: "It is not just the major UK charities, such as Cancer Research UK or the RNIB that rely heavily on legacy donations. Smaller, local charities also benefit greatly from money left to them in the Will of kind benefactors.

"Although an IHT nil-rate band increase to £1 million seems unlikely in view of the continued deficit in the country's finances, any increase would almost certainly have an impact on people's propensity to leave money to charity. We would urge anyone who wants to give money to a charity to make the appropriate provision in their will."

Top legacy amounts left to charities in England and Wales - 12 months to October 2014

Ranking

Charity

Legacies 12 months 2014

1

Cancer Research UK

142,456,707

2

RNLI

101,457,157

3

RSPCA

67,671,000

4

Macmillan Cancer Support

51,219,000

5

The National Trust

44,688,000

6

The Salvation Army

41,697,000

7

The People’s Dispensary for Sick Animals (PDSA)

38,069,000

8

The Royal National Institute of Blind People (RNIB)

35,463,000

9

The Guide Dogs for the Blind Association

33,000,000

10

Royal Society for the Protection of Birds (RSPB)

27,038,000

 

Source: charitytrends.org / CAF

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Charities