As everyone is aware making donations to charity, whether during your lifetime or via your will on death, could help you save tax. This could be in the form of income tax and capital gains tax during your lifetime and/or inheritance tax on your death.
Income tax relief comes in the form of the potential for additional relief where you are a higher rate taxpayer. In addition, gifts to charity are exempt from capital gains tax. On your death, if you leave at least 10% of your estate to a charity in your will then your estate may be subject to a reduced rate of inheritance tax of 36%, as opposed to the normal 40%.
However, what may be less well known is that the charity itself has conditions that have to be met to ensure that you get these valuable tax reliefs.
One such condition is that, with effect from April 2024, only donations to UK charities will qualify for the UK tax reliefs mentioned above.
The main reason for this change is to ensure that following Brexit, only UK charities would be able to benefit from the UK’s generous charity reliefs and exemptions.
Therefore, from April this year care needs to be taken to ensure that where you are making a donation, whether now or via your will, that the donation you are making is actually to a UK charity, otherwise you may lose out on these valuable reliefs.
This is probably more important in respect of charity donations left via your will, as it may have been some time ago that your will was written.
We generally recommend that wills are reviewed every 2-3 years, in addition to when there is a change in your personal circumstances. So if you have left a substantial donation to charity via your will, now might be a good time to check that the charity is a UK charity.
Having said that, with a general election coming up which is likely to result in a change in government, combined with the fact that inheritance tax has been on the political agenda for some time, who knows what inheritance tax will look like in the future………..