36% IHT rate

aroominyork

Please could someone check if these calculations are correct about reducing IHT to 36% when leaving 10% of a net estate to charity. 

1) No gift to charity

Gross estate £1,200,000

Less NRB and RNRB (£500,000)

Net taxable estate £700,000

IHT at 40% £280,000

Amount to legatees £920,000 

2) 10% gift to charity

Gross estate £1,200,000

Less NRB and RNRB (£500,000)

Net estate £700,000

Gift to charity £70,000

Net taxable estate £630,000

IHT at 36% £226,800

Amount to legatees £903,200 

This would mean that (£920,000 - £903,200) / £70,000 = 24% of the gift comes from reduced inheritance to legatees and 76% from less tax.

Keep_pedalling

Unfortunately no, to get the reduction the gift to charity would need to be £120k, 10% estate. 

The net value of the estate is the gross value minus funeral costs and debts, not gross amount less IHT exemptions. 

DRS1

Shouldn't the amount to legatees be reduced by the gift to charity?

aroominyork

Keep_pedalling said:

Unfortunately no, to get the reduction the gift to charity would need to be £120k, 10% estate. 

The net value of the estate is the gross value minus funeral costs and debts, not gross amount less IHT exemptions. 

I thought so also, but it seems it is net chargeable estate. See the examples here which both show the beneficiaires forgoing 24% of the gift's value.

Albermarle

aroominyork said:

Keep_pedalling said:

Unfortunately no, to get the reduction the gift to charity would need to be £120k, 10% estate. 

The net value of the estate is the gross value minus funeral costs and debts, not gross amount less IHT exemptions. 

I thought so also, but it seems it is net chargeable estate. See the examples here which both show the beneficiaires forgoing 24% of the gift's value.

AIUI, you are correct .

How giving to charity can cut an Inheritance Tax bill