Inheritance Tax Saving

The Conservative Party Foundation has received approval from Her Majesty's Revenue & Customs to be able to receive legacies (and lifetime donations) free of Inheritance Tax. So you can have peace of mind knowing that any gift to the Foundation will not only live on to make a difference, but could also reduce the Inheritance Tax burden on your estate.

How do you determine your Inheritance Tax exposure:

Everyone's estate is exempt from Inheritance Tax up to a certain threshold: £325,000 for an individual in 2009-10.

What if you're not single?

Married couples and registered civil partners are allowed to pass assets from one spouse or civil partner to the other during their lifetime or upon death without having to pay Inheritance Tax - no matter how much they pass on - as long as the person receiving the assets has their permanent home in the UK.

On death, if someone leaves everything they own to their surviving spouse or civil partner in this way, it is not only exempt from Inheritance Tax but it also means they have not used any of their own Inheritance Tax threshold. It is therefore available to increase the Inheritance Tax threshold of the second spouse or civil partner when they die. Their estate can be worth up to £650,000 in 2009-10 (ie £325,000 x 2) before they owe Inheritance Tax.

How leaving a legacy can reduce your beneficiaries' Inheritance Tax bill:

If the value of your estate is more than the current threshold your beneficiaries will have to pay Inheritance Tax (currently 40%) on anything beyond this.

However, a legacy left to the Foundation can be subtracted from the value of your estate before Inheritance Tax is calculated - bringing the total value of the estate closer to the threshold so that any tax due can be reduced or even removed completely.

Individual person example, if your estate was worth £400,000, then your estate would be £75,000 over the £325,000 threshold. So your beneficiaries' Inheritance Tax bill would be £30,000 (that is, 40% of £75,000) and they would receive £370,000.

If you were to leave a legacy of £40,000 to the Foundation, then your estate would only be £35,000 over the threshold. So the Inheritance Tax bill would be £14,000.

Your beneficiaries would have a lower tax bill (£14,000 instead of £30,000), they would receive £346,000 and the Foundation would receive a gift of £40,000, making a total distribution of £386,000 - an increase of £16,000.

Leaving a gift in this way means that your inheritance goes to a cause you believe in.

Please consider these important advantages when drawing up your Will.

We would advise that anyone considering making or updating a Will should consult a professional opinion of a practicing solicitor or legal advisor.