Budget 2011: IHT slashed by 10% for charity gifts

George Osborne has said estates will benefit from a 10% discount in inheritance tax (IHT) if they leave part of the money to charity, though the cut translates to just a 4% reduction in the final bill.

IHT is currently charged at 40% on estates worth more than £325,000, the nil-rate band, following their owner's death. It is also levied on assets transferred in the preceding seven years.

But the 10% discount is taken off of the current 40% tax rate, meaning an actual reduced tax rate of 36%.

The nil-rate band can still be transferred to the surviving spouse, creating a combined tax-free allowance of £650,000.

Darling froze this threshold for four years in March 2010's budget.