Dodge?

Charity donations soar as thousands dodge inheritance tax

All gifts to charitable causes are tax free. However, someone can cut the inheritance tax rate paid by their estate by donating more than a tenth of your worldly possessions to charity. This discounts the typical 40pc rate to 36pc on assets over the £325,000 tax-free threshold.

As an example, if your taxable estate is worth £250,000, you would be faced with an IHT bill of £100,000, leaving your family with £150,000. By giving away 10pc – £25,000 – to a registered charity, the tax bill would drop to £81,000, leaving your family with £144,000 following the donation. Although heirs lose £6,000, the charity is £25,000 better off.

What’s a “dodge” about obeying the tax law?

17 thoughts on “Dodge?”

  1. IHT must be the most ambition-destroying tax ever invented.

    Apart from the desire it installs in people to see that the bastard government doesn’t get its second bite at the cherry, of course.

  2. As the example clearly indicates, people are not avoiding inheritance tax for personal gain as the amount actually inherited falls. It is a means of leveraging charitable donations at a ratio of a little over 4:1. If your aim is to maximise the inheritance of your beneficiaries, then you wouldn’t do it.

  3. The Meissen Bison

    The challenge, of course, is to find a suitable charity because most national charities run political campaigns with venal and corrupt management, obsessed by wokeness and political correctness.

    Might one set up a charity to campaign against tax-breaks for charities?

  4. Why not encourage people to give money to a charity of their choosing, rather than for it to go into the devouring maw of the state.

    It talks about the taxable estate which the bit above the threshold (individually, £325,000) so the example ignores the first, tax-free portion and if a someone leaves their estate to their spouse, your threshold is doubled. There is also a higher allowance for homes given to children, so the threshold can be as high as £1 million.

    With sensibly drafted wills, a couple would need quite a large estate to get to the point where any tax is due.

  5. The challenge, of course, is to find a suitable charity because most national charities run political campaigns with venal and corrupt management, obsessed by wokeness and political correctness.

    I’ve no idea how venal or corrupt the management is, but I’ve configured Amazon Smile to donate to the Countryside Alliance Foundation. That was the unwokest I could think of at the time.

  6. Dodge in its original meaning Tim, not as in “dodgy”.
    As in “skiers dodge an avalanche”

  7. I would have thought IHT on a chargeable estate of £225k (after donating the 10%) would be £90k.

    The £81k figure would mean that after donating 10% the residual chargeable total had only been assessed at 36%. Not sure that’s right.

  8. That’s what the tax break is. A lower tax rate on the remainder if you donate the 10% first.

  9. if your taxable estate is worth £250,000, you would be faced with an IHT bill of £100,000, leaving your family with £150,000

    I’m confused – If the tax-free threshold is £325,000, wouldn’t the net amount be £475,000? I’m assuming “taxable estate” here is the amount above the tax-free limit.

    Unless the system is so ludicrous that it taxes you up to a certain amount, and then above this nothing on the entire amount.

  10. Bloke in North Dorset

    Your friendly reminder that you should never bequeath a percentage of your estate to any of the national charities. They have more lawyers than your Executor and they will run him ragged making sure they get every penny due. They demand to see all documents and go through them with a fine-tooth comb.

    I got that tip from someone acting as executor for a number of wills that had done that, he said it can take months and cost a fortune.

  11. @ BiND
    Except Stewardship Fund.
    When my mother died, my sisters and I (as joint residuary legatees) put through a Deed of Variation to give 10% of my share (30% in the case of my younger sister) to Stewardship Fund. We got co-operation and no hassle.

  12. BiND, that’s the kind of advice you ought to get from a professional writer of wills. It must be better to bequeath a specific amount, in most cases

  13. Bloke in North Dorset

    John,

    Never heard of them so had a look. Lets hope they keep it that way but it looks like the sort of org that an ideal takeover target for the modern left.

  14. Ever tried emigrating?

    IHT is mild compared to the 5 ribs they want from you then… Especially when the nation you’re moving to ( like in my case an attempt at Oz ) requires you to renounce your former citizenship…

    60% of estimated ( their estimate, not yours..) gross worth ( including potential pensions) for Clogland. The Busybodies do not like you leaving…

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