Complex rules around gifting to charity could leave an unexpected tax bill


In 2022, almost 37,000 estates included a gift to charity. Gifting to charity is a well known strategy for minimising an Inheritance Tax bill, but recent case law shows the importance of getting your will professionally drawn up to ensure there are no nasty surprises for your loved ones.


You may recently have read about Caroline Burke who thought that a will left by her aunt left money equally between charities and other beneficiaries. Unfortunately the will had not stated who should pay the inheritance tax. Silence on this point meant that the beneficiaries did not inherit equally – instead the inheritance tax came out of the shares which did not include the charities, meaning the charities received more than the others.
Gifts to charities are exempt from inheritance tax, so when an estate is divided equally between charities and non-charities, the entire inheritance tax comes out of the non-charities’ shares, unless the will specifically states otherwise.
Many people leave money to charity and it is a nice way of doing good while reducing the tax payable. However, without careful consideration it could result in the charities receiving more than intended. That is not to say don’t leave to charity; in some circumstances not only is the gift to charity inheritance tax free, but leaving some of your estate to charity can result in the tax on the rest of your estate being reduced from 40 per cent to 36 per cent.
If you are considering leaving money to charity in your will, it is important take legal advice. Trethowans can help with this, please call us on 0800 2800 421 or get in touch here.


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