In a case where an estate is otherwise taxable (having taken into account relevant personal, spousal or other available allowances) the value of any specific gifts made out to charities in a Will are also not included as part of the taxable estate of a deceased. This is the case even where the gift may have been made during the seven years prior to death.
If Mr H had a remaining taxable estate of £110,000 at the date of his death, but he left a gift in his Will of £50,000 to Charity A, Mr H’s taxable estate will only be £60,000 since the gift to charity is wholly exempt from their taxable estate.
In addition, where the above gift makes up 10% or more of the net estate, then tax will only be paid at the rate of 36% on all of the remaining taxable estate, rather than at the normal 40% Inheritance Tax rate.