This research was carried out by Grayson Solicitors to help highlight the importance of legacy donations.
People wishing to donate money to charity can benefit from a tax break that reduces the amount of inheritance tax (IHT) they have to pay, as long as the money is left in their will.
The provision, which reduces the IHT rate from 40% to 36%, is designed as an incentive to reward those thinking about leaving money to a good cause.
For many people, charities quietly work away in the background performing their vital service with little fanfare or solicitation.
However, these philanthropic organisations could not do their work without the generous donations received from caring members of the public. Whether as a one-off payment or regular donations through a standing order, charities are beholden to the generosity of others to perform their life-changing work in communities throughout the country and abroad.
One way in which people can help charities is by leaving a legacy — money designated to good causes by someone in their will.
Three leading Sheffield charities — Bluebell Wood Children’s Hospice, Sheffield Royal Society for the Blind (SRSB) and Support Dogs — have recently been involved in research looking at the impact that legacies have on charity finances and how likely members of the public are to leave provision in their wills for this form of charitable donation.
The data shows that legacy contributions make an average of 18% of a charity’s overall annual income, with some charities receiving as much as one third of their income through legacies.
But many people are still unaware of the tax breaks that come with this type of giving.
Worse still, a recent survey shows that as many as 48% of people are ‘extremely unlikely’ to leave money to charity in their will.
The survey of 1,000 people in the Yorkshire area also found that only 9% were ‘extremely likely’ to leave a legacy. And while 9% said they were ‘fairly likely’ to leave some money, 14% said they were ‘fairly unlikely’ — grim news for charities in the UK and elsewhere.
These figures, however, might be different if more people were aware of the tax breaks on offer.
At present, the taxman takes 40% of every pound of a person’s net estate (the amount they are worth after liabilities and debts have been accounted for) that is over £325,000 (the nil rate band). So, up to £325,000 you pay no IHT, but any on any amount after that you pay 40% IHT.
For the last few years, those people who give at least 10% of their wealth to charity as a legacy are only required to pay IHT at 36% on any amount above the nil rate band (which stands at £325,000).
This provision works as an incentive that effectively reduces any loss a person might make by leaving a charitable donation.
By following just a few simple steps, you have the opportunity to support a charity while also preserving the financial support you wish to leave your family and friends.