Inheritance Tax and Charitable Donations

Are you looking for a way to reduce the inheritance tax bill on your estate? If so keep reading, as Prestige Tax and Trust Services discusses inheritance tax and charitable donations.

Inheritance tax

Inheritance tax is a levvy that the government applies to the estates of people who have passed away. If the sum total of your estate measures over £325,000, it’ll have to pay a 40% tax on anything over this threshold. It’s vital you learn how to calculate inheritance tax if you want to ensure that your loved ones benefit from your estate once you’ve passed away.

Charitable donations

If you want to reduce the amount your estate is legally obligated to pay in inheritance tax, there’s one way you can do so; include charitable donations in your will.

If you donate 10% or more of the ‘net value’ of your estate to charity, the government will allow you to pay a reduced inheritance tax rate of 36% on some assets in your estate. The net value of your estate is its net worth once you’ve subtracted debts and liabilities, relief, exemptions (e.g. anything left to your spouse) and anything below the £325,000 threshold from its gross total.

Chosen charities

However the government won’t allow you to use the 36% inheritance tax rate for donating to any old charity. You’ll only qualify for the reduced rate if you leave assets to charities that have an HM Revenue and Customs (HMRC) charity reference number, or community amateur sports clubs.

How to work out and claim

If you believe that you may qualify for the reduced rate, there’s an easy way to see if you’re right. You can use the reduced rate calculator to determine whether your estate qualifies. To do this, however, you’ll need to know the value of the component assets of your estate.

If you do qualify and you want to claim the reduced rate, you need to tell the person who you have appointed to act as the executor of your will or the administrator of your estate. After you die, they’ll need to complete the IHT430 form and the IHT400 form and send them both to HMRC when they apply for probate.

Prestige Tax and Trust Services

Inheritance tax law can be complicated, but you need to be able to comprehend it’s intricacies to ensure your estate pays the correct amount when you pass away. This is why if you need help clarifying the complexities of inheritance tax, you should let Prestige Tax and Trust Services lend a helping hand. We have a team of experienced legal experts who will ensure that your estate pays the correct amount of inheritance tax.

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