Leaving money to charity in your will

Harriet Meyer / 09 April 2015

Leaving money to a charity in your will supports good causes and can reduce the amount of inheritance tax your heirs will have to pay. Harriet Meyer explains why you should consider leaving a legacy and how to go about it.



Leaving a gift to your favourite charity when you die can make a lasting impact, and there are tax advantages to ensure this option appeals.

Perhaps it’s a charity you’ve supported all your life by making regulation donations, or you’re keen to reduce the tax you pay on death.

Of course, you don’t have to wait until you die to donate to a charity – but leaving money in your will can make sure it continues to do good, and cut your tax bill, leaving your family with less of a financial headache.

Read six ways to help charities, without donating money.

Charitable legacies and inheritance tax (IHT)

You can leave everything to your spouse tax-free, but after that each of us is subject to the inheritance tax threshold, currently standing at £325,000. Beyond this threshold anything we leave behind is subject to IHT at 40%.

That is, unless you leave it to an exempt body such as a UK-established charity. Charitable gifts left in wills are outside your estate before inheritance, enabling you to reduce the tax paid on your estate. You could even wipe it out entirely if you left everything over £325,000 to charity.

However, if you leave at least 10% of your estate, after any exemptions, to charity, this reduces the rate of any IHT due from 40% to 36% - which could save thousands.

What are the different types of legacy?

You have a choice when it comes to how you gift money. There are three types of legacies, depending whether you want to leave a physical item or a cash gift: pecuniary, specific, and residuary.

Pecuniary

This is the simplest form of legacy to leave to a charity, and the most common. Basically, it’s a cash amount, so you state in your will that you wish to leave £X to a particular charity. The executor of the estate is in charge of ensuring this sum gets to your charity of choice.

Specific

This is when you leave a particular item, such as property or shares. So, you could, for example, leave £X worth of individual shares to charity.

Residuary

This is when you leave the whole, or share of what’s left to charity once everything else has been paid such as gifts, taxes, debts and costs.

Read more about how to reduce inheritance tax. 

What to do

Remember to include the details of the charity in your will carefully, to avoid any disputes. This’ll include its registered charity number and address.

If you want to leave money to a particular branch of a charity, check this is possible; some aren’t entitled to accept legacies. Ask for its tax-exempt reference number.

Some charities offer services to help you write a will for free, if you plan to leave a legacy – so it’s worth asking if this is available.

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.