Should the Government Remove VAT on Charitable Wills?
Wills have long been a great way of ensuring your financial wishes are carried out as you would like. From taking care of your loved ones’ monetary needs through to property and estate handling, a will is essential in making sure any loose ends are tied up after you pass.
Some people choose to leave a sum of their estate to a charity.
Remember A Charity research shows that 35% of the UK aged 40+ are ‘happy to give a small amount to charity in their will’ once they’d taken care of family and friends. Sadly only 6.3% do. If the Government remove VAT on charitable wills an increase in bequests is a likely outcome.
So we ask, “should the Government remove VAT on charitable wills?
According to recent research, £2.24 billion was last year’s total legacy income in the UK. But only 7% left a charity bequest.
The Law Commission said back in July 2017 that it would launch a consultation into the “outdated law of wills” with a view to overhaul them. The Commission found that approximately 40% of UK adults who die each year do not leave a last will and testament.
The Commission proposed a number of changes regarding the laws surrounding wills, including ways to relax the “strict formality” rules, taking into account such conditions as dementia with capability tests. A lowering of the age of will making from 18 to 16 was also suggested.
Another wills reform proposal came from Remember A Charity. They urged the Government to exempt VAT from the cost of writing wills that contain a charity bequest. Remember A Charity predicted that this kind of VAT exemption would double the number of people giving to a charity, creating around £800 million towards good causes for the relatively low cost to the Government of £375,000.
Rob Cope, Director of Remember A Charity said in March of this year, “We are calling on Government to introduce a VAT exemption on the cost of writing all wills that include a charitable gift. While this change would come at a relatively low cost to Government, this could make a huge difference to charities, giving solicitors and will-writers cause to highlight the option and benefits of legacy giving with all clients.”
As a modern society, we need to ensure that legacy giving is not just something reserved for the wealthiest in society. It should be something we are all able to do, given the opportunity. And if the Government did eliminate VAT on charitable wills this would be the case.
Until this potential VAT exemption on charity bequests comes into fruition, you can significantly reduce the amount you are taxed if you wish to leave some or all of your estate to charity. If you leave a minimum of 10% of your total estate’s worth to a charity, you decrease the Inheritance Tax rate from 40% to 36%.
Rules surrounding finance, wills and charitable donations are not always clear so it’s of great benefit to seek advice from a professional financial planner.
gpfm financial planners have extensive experience in UK Inheritance Tax Planning.
To see how you can leave a charitable legacy or other wills advice, get in touch with a friendly team member today.
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.