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Do I have to pay tax on gifts in my Will

When you leave a gift to a loved one in your Will, they may have to pay Inheritance Tax. Often, leaving a gift in your Will to a charity can reduce the amount of tax owed. 

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Does everyone have to pay Inheritance Tax?

Technically, everyone is eligible for Inheritance Tax (IHT), but there are a few situations in which your estate might not have to pay it.

You won't have to pay IHT if:

  • The value of your estate – that’s the combined value of all your money, property and possessions – is less than £325,000
  • You leave your entire estate to your spouse or civil partner, a charity or a community amateur sports club
  • Gifts you give in your lifetime are exempt from IHT, subject to some limits, as long as you continue to live for at least 7 years after you’ve given the gift. If you die sooner than this, IHT may be payable.

You will have to pay some IHT if:

  • You leave part or all of your estate to your children – including adopted children, foster children or stepchildren – and grandchildren. However, the tax free threshold rises and in addition to the nil rate band of £325,000, a residence nil rate band may also be available at the rate in effect at the date of death if the main residence is left to lineal descendants i.e. children or grandchildren.
  • You leave gifts in your Will to any other relatives, friends or non-charitable organisations.

Can I transfer my IHT-free threshold to someone else?

Your IHT-free threshold is transferable to your spouse or civil partner – so if one spouse or partner dies without using all of their IHT allowance (for example, if they give their whole estate to the surviving partner), their unused allowance will be carried forward to the time when the other partner passes away (including a residence nil rate band as is in effect at the date of death if the main residence is left to lineal descendants i.e. children or grandchildren).

How much is IHT?

Anything above your tax-free threshold is currently taxed at 40% - this means that beneficiaries of your estate will receive £6,000 for every £10,000 over the threshold your estate is worth. Anything you leave to a spouse or civil partner, charity or community amateur sports club isn’t included in this threshold, and as mentioned above, the threshold is higher when you’re leaving money, property or possessions to children or grandchildren.

The rate, tax-free thresholds and other rules around IHT change from time to time, and although we make every effort to keep this page up to date, we recommend you visit the official Government page on IHT for full details.

Reduce your tax bill by leaving us a gift in your Will

Not only is any amount you leave to a charity exempt from IHT, but if you leave 10% or more of the total value of your estate to a charity, the tax liability on the rest of your estate will go down, from 40% to 36%. Making use of this could enable you to leave a legacy to a charity of your choice while helping your children, spouse, or whoever else you choose to leave an inheritance to, by lowering the amount of tax they would have to pay.

For example, if your estate was worth £450,000 at the time of your death, and you chose to leave all of this to a non-exempt relative or friend, the IHT due would be £50,000 (40% of the amount over your £325,000 threshold). However, if you leave £50,000 to the BHF and the remainder to that same non-exempt person, IHT liability falls to 36% of £75,000. This cuts the IHT bill to £27,000. And in the process, you'll be leaving a legacy - by donating to a cause that makes a real different to people's lives.

Need help writing your Will?

We can't provide any specific advice or help on IHT to our supporters, and recommend you visit the Government website or consult a solicitor if you have more questions. However, we as part of our work with the Free Wills Network, we can help you get your Will written for free by a local, qualified solicitor.

We're also happy to help if you have any questions about leaving a gift in your Will. Please feel free to get in touch with our specialist Legacy Management Team on [email protected], or call us on 020 7554 0075, and we'll do everything we can to help.

If you need any definitions of other legal or financial terms you've come across when writing your Will, take a look at our glossary.

You can also request our free guide that includes all the information you'll need on leaving a gift in your Will.

Request our free Wills guide

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