Gifts to qualifying charities are exempt from Inheritance Tax, with no upper limit. This applies both to gifts made during the deceased’s lifetime and to assets left to charity in their Will.
How the exemption works
Where a qualifying charity receives assets from an estate, the value of those assets is deducted from the taxable estate. This reduces the net taxable figure and can reduce or eliminate the IHT liability.
The reduced rate for charitable estates
Where at least 10% of the “baseline amount” (the net estate after the nil rate band and other deductions) is left to qualifying charities, the IHT rate on the remainder reduces from 40% to 36%. The calculation to determine whether the 10% threshold has been reached is complex.
YouCanDoProbate does not currently support the reduced rate calculation. If a significant charitable legacy is included in the Will and you believe the 10% threshold may apply, contact our team before starting.
What qualifies as a charity?
Charities registered in England, Wales, Scotland, or Northern Ireland, certain other bodies including community amateur sports clubs, and organisations in EU or EEA countries and other specified jurisdictions, subject to conditions.
Charitable gifts made under the Will are captured in the platform walkthrough and the standard charity exemption is applied in the IHT400 automatically.
