Party leaders donate 10% of wealth

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party leadersStefan Rousseau/PA Archive/Press Association Images

There has been a surge of charitable feeling in Westminster. All three of the main party leaders have pledged to donate 10% of their estates to charity when they die.

So what's going on? Is there a new world older? Does Westminster secretly have a heart of gold? Or is there another reason behind it?

Charitable gifts

All three party leaders, Cameron, Clegg and Miliband, announced their charitable pledges together, signing up to a campaign called Legacy10, which is trying to encourage people across Britain to increase their charitable giving after their death.

There's no denying that these will be life-changing sums of cash for the individuals they help through their chosen charities, and we shouldn't be so skeptical that we forget this will involve each of the leaders giving away tens or even hundreds of thousands of pounds on their death.

It's an example to all of us.

The tax benefit

However, before we get too carried away, it's worth pointing out that those set to inherit from these three leaders could actually end up losing very little - while the charities benefit massively.

New inheritance tax laws will come into effect in April to promote the campaign. Anyone who gives 10% of their estate to charity stands to pay a lower rate of inheritance tax. At the moment it means the 40% rate is brought down to 36%.

It's worth looking at what this would mean in practice. At the moment you only pay tax on the portion of your estate worth more than £325,000. Therefore, if you had an estate of £1 million, without any tax planning at all, your beneficiaries would get £730,000 and HMRC £270,000.

If you gave 10% away above the threshold, the charity would get £67,500, the taxman £218,700 and the beneficiaries £713,800. So for a cost of around £16,000 to your family, a charity could gain over £65,000.

It's a no-brainer.

Will you?

The campaign was designed to encourage more giving in people's wills. While 74% of people give money to charity, only 7% do so after their death. The move will mean we can do so much more at relatively little cost.

It has already received some high-profile support from people including Richard Branson and Lord Coe.

But what do you think? Are you tempted to sign up, or will your family need everything you can possibly give them? Let us know in the comments.

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