Why a legacy is tax efficient
As a Charity recognised by HMRC, Dulwich College pays no tax on gifts of money during your lifetime or on your death. All legacies to the College are free from Capital Gains Tax and Inheritance Tax. If you choose to make a charitable gift in this way, you may reduce the total tax liability of your estate to your family.
Currently, estates in excess of £325,000 are subject to inheritance Tax and if you leave a minimum of 10% of your estate to charity, the tax due may be paid at a reduced rate of 36% instead of 40% on the balance of the remaining estate.
The examples below show the tax paid by an estate worth £1,000,000 with and without a legacy of £100,000 to Dulwich College. The most generous gift of £100,000 reduces the tax bill to your estate by £63,000 and only costs the remainder of your estate £37,000.
|No gift to Dulwich||With a Gift to Dulwich|
|Value of Estate||£1,000,000||£1,000,000|
|Less Tax free allowance||£325,000||£325,000|
|Less Legacy Gift||£0||£100,000|
|Subject to tax||£675,000||£575,000|
|Tax Paid (40% or 36% respectively)||£270,000||£207,000|
|Amount payable to beneficiaries||£730,000||£693,000|
Please note your estate will be subject to the tax regime at the time the legacy is exercised. We advise you to check with HMRC for further information.