Legacy fundraising is likely to be damaged by changes to inheritance law which mean tax will have to be paid on many less estates, Remember a Charity has said today.
Remember a Charity, which campaigns to increase the amount left to charities in wills, said the introduction of the main residence nil-rate band – effective from 6 April – could reduce the number of legacies by 1,200 a year.
The new tax band increases the inheritance tax threshold by £100,000 per person, from £325,000 to £425,000, for direct descendants inheriting the main family home.
The average charitable bequest is worth around £20,000, suggesting that changes to wills could cost the sector £24m, although this estimate is very uncertain.
Remember a Charity said that tax breaks are a natural way for will-writers and solicitors to introduce the idea of a charitable legacy, and it expects fewer to do so as the number of estates subject to tax reduces. Those whose estate lies just above the tax threshold are roughly twice as likely to give a gift as those whose estates lie just below it.
In Fundraising Magazine
Professor Sarah Smith of the University of Bristol, said: “We know that the tax incentive is an important factor for people choosing to give, particularly for those just above the IHT threshold.
“While it is difficult to predict how legacy giving will be affected by the changes, our worst case estimate is that charities could miss out on as much as 1,200 fewer charitable estates annually.
“We hope the reality won’t be as dramatic as this, but the changes are certainly a timely reminder to the sector to think about how it can protect and grow legacy income.”
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