£1.7bn given to charities through wills per year – 300 HNWs donate more than £1m each
£1.7bn was donated to charity by 10,100 people through their Wills in the most recent year*, says Boodle Hatfield, a leading private wealth law firm.
Almost half (£800m) of the total figure came from 300 high-net worth (HNW) individuals who gifted £1m or more, leaving charities an average of just under £2.7m per donor.
The remaining 9,800 individuals who gifted money to charities through their Wills donated £900m, with the average donation totalling almost £92,000.
Gifts in Wills account for around a third of the charity’s income through personal donations and grants.
There are a number of reasons why it is tax efficient to make charitable gifts in a Will. Firstly, anything left to charity is automatically free of UK inheritance tax. Secondly, the inheritance tax rate on the deceased’s remaining estate falls from 40% to 36% if at least 10% of their net estate is left to charity.
Charities have faced numerous challenges as a result of the pandemic. Many have had to scale back or shut down services due to a lack of funding. This, coupled with an increased demand for their services, has led to cash reserves being hit.
At the height of the pandemic in 2020 it was estimated that charities faced a shortfall in funding of £10.1billion.**
As the UK population starts to age more people are considering giving money to charity rather than their children, says Boodle Hatfield. This is because those living into their 80s and 90s are likely to have children in their 50s and 60s who have long been financially independent and therefore, need to be left less money by their parents.
Boodle Hatfield adds that HNWs who are looking to pass on their estates to charities in their will should consider Lifetime Giving instead.
Lifetime Giving to charities qualifies donors for various tax reliefs, such as Gift Aid. Assets can also be given free of inheritance tax.
Kyra Motley, Partner at Boodle Hatfield, says “Charities are increasingly seeing gifts in Wills as a growth area of income. The value of residential property held in estates means that many donors are relatively cash poor but asset rich.”
“Legacy giving has always been essential for charities but given the devastating impact of the pandemic on the sector, people may want to think about bringing forward their gifting. Lifetime Giving also allows the donor to really be involved with the donation they are making and to see their money make a real difference to changing lives. This can be very rewarding and can enable charities to capitalise on the impact sooner and faster”
*HMRC, 2018/19 – latest tax year for which data is available
**Pro Bono Economics
This article was covered in eprivateclient and International Adviser on 1st March 2022.