Tax changes may not be enough to help charities

Changes to the inheritance tax rules aimed at raising an extra £300m a year for charities announced in Wednesday's Budget, may not achieve the desired effect, a tax expert has warned.

Under the changes – which will come into effect in April 2012 – the amount of cash collected by the Treasury will be reduced when 10 per cent of estates are left to charity. Announcing the move, George Osborne said: "I want to make giving 10 per cent of your legacy to charity the new norm in our country."

But Andrew Hubbard, the chairmn of tax at RSM Tenon, said the plan is flawed as there will be no financial incentive for individuals. "The initiative is designed to help charities rather than individuals, but without an incentive for the individuals, it may not be enough to achieve its aim," he warned. "I remain unconvinced that the proposed reduction to inheritance rates in return for a 10 per cent legacy to charity will be much of an incentive to individuals – especially as it appears to only apply on death and not to gifts in lifetime. Trusts and equity-release plans are likely to remain more popular schemes for people looking to minimise their IHT liability."

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