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Plans to axe inheritance tax could affect legacy income

15 August 2023 Written by Davidson Shirley Solicitors Category: Wills & Estates

During the summer, Inheritance Tax (IHT) has been in the news almost every day. Along with more than 50 other MPs, Jacob Rees-Mogg, Liz Truss, and Nadhim Zahawi have written to the prime minister to demand the abolition of IHT. The Daily Telegraph has begun a drive to repeal the tax, and it is said that Downing Street is debating whether to include this idea in its election manifesto.

Remember A Charity is worried that such an alteration to the IHT framework might have a major adverse impact on legacy revenue, putting at risk one of the UK's greatest sources of voluntary income, which currently raises £3.9 billion annually.

Given the significant inheritance tax incentives in place, legacy giving is roughly six times more common on estates subject to inheritance tax (36% vs 6%) and accounts for half of all legacy revenue each year. Therefore, any inheritance tax plan must take into account the potential effects on gifts left in wills and the many organisations that depend on this support each year.

In the UK, we currently enjoy one of the most attractive settings for legacy giving worldwide. People can support whatever charity they like, and gifts made in wills are tax-free, thus raising the inheritance tax allowance on supporters' estates. Will preparation is therefore rather simple.

Additionally, the inheritance tax rate is reduced from 40% to 36% when people donate 10% or more of their inheritance to charitable organisations. This can significantly reduce the overall tax burden. These rewards enable and encourage supporters to make significant contributions. It establishes legacy giving as a social standard by fostering confidence in it. The philanthropic option is often advised to those sorting their estate by solicitors.

Charitable organisations that benefit from inheritance tax cannot afford to take the chance of jeopardising such a crucial source of philanthropic income in this context, where legacy giving is thriving and charities so desperately need that support.

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