Life time gifts
If you are a UK taxpayer, a life time gift increases the amount which we receive by 25 per cent – and if you are a higher rate tax payer the gift reduces your tax bill.
So, if you give us £100 and Gift Aid applies
We receive £125
And if you pay Income Tax at 40 per cent, you can claim back the difference between basic rate and the higher rate: in this example that’s £125 x 20% = £25.
Gifts by will
Gifts in your will are free of Inheritance Tax. So if your estate will be taxable at the standard rate on death of 40 per cent, every £100 you give us in fact only costs your estate £60. The saving is even greater if your estate will qualify for the lower rate of Inheritance Tax which applies if you give 10 per cent or more of your potentially taxable estate to charity – we explain in more detail below.
You can use a simple wording for your legacy, for example:
I give £[ ] to Aldeburgh Jubilee Hall CIO Registered Charity Number: 1155896.
If you want to give a percentage share of your estate to charity and also benefit family and friends, then that’ll require extra wording to clarify who pays the tax. So you’ll need to add:
I intend that any Inheritance Tax arising from my death is paid from the shares of residue which I have given to non-charitable beneficiaries, and not from the share or shares which I have given to charity.
Your giving will be even more tax effective if you give 10 per cent or more of your potentially taxable estate to charity, thereby reducing your rate of Inheritance Tax from 40 per cent to 36 per cent. Here is an example where the gross estate is worth £500,000 and the net estate chargeable to tax is £175,000.
Without a charitable bequest With a 10% charitable bequest
Gross estate £500,000 Gross estate £500,000
Less nil band -£325,000 Less nil band -£325,000
Net Estate £175,000 Net Estate £175,000
No charitable donation £0 Less bequest of 10% -£17,500
Taxable estate £175,000 Taxable estate £157,500
Less IHT at 40% -£70,000 Less IHT at 36% -£56,700
Remaining Estate (incl. nil rate band) £430,000 Remaining Estate (incl. nil rate band) £425,800
In this example your personal beneficiaries forego the sum of: £4,200. But the charity (or charities) would benefit from a total of: £17,500
You can achieve this by a legacy of a fixed amount (as long as it’s enough), or by a gift of a share of residue – for example (you’ll have to excuse the jargon):
I give Aldeburgh Jubilee Hall CIO Registered Charity Number: 1155896 an amount equal to 10 [or larger figure]per cent of the baseline amount in relation to the general component of my estate.
Then you should continue:
The legacy given by this clause shall in no event be less than [£xxx] whether or not the lower rate of tax shall be applicable.
This second sentence ensures that if it turns out that your estate isn’t potentially taxable, we still receive a gift from you – of an amount you choose.
Again if you have also left shares in your estate to non charitable beneficiaries – family and friends – you’ll need to add:
I intend that any Inheritance Tax arising from my death is paid from the shares of residue which I have given to non-charitable beneficiaries, and not from the share or shares which I have given to charity.