Virgin founder pledges to give away 10% of wealth

Billionaire entrepreneur Richard Branson has joined a handful of the United Kingdom’s richest in pledging to bequeath 10% of his wealth to charity when he dies.

This new trend in giving in the UK is a result of Legacy 10, an initiative aimed at convincing 10% of the UK’s population to give 10% of their wealth to charity in return for an inheritance tax break.

As of April 2012, those who donate 10% of their wealth to charity will enjoy a reduction in the tax on the remainder of their wealth, from 40% to 36%.

Forbes magazine lists Branson as the UK’s fourth richest man, putting his wealth at $4.2 billion.

This means that Branson has pledged $420 million to charity, in return for a $151.2 million saving on taxes to the remainder of his wealth (at his current net worth.)

Branson has joined the likes of investment banker Jacob Rothschild, Carphone Warehouse co-founder Charles Dunstone and owner of airline BMI Michael Bishop in making the pledge.

The Legacy 10 initiative is aimed at those who own more than the tax-free threshold of £325,000, and will be affected by the inheritance tax.

Robert Blower from the Charles Russell law firm said the initiative could present a drop in lifetime giving, as charitable donations made during one’s lifetime will not be included in their net worth at the time of death.

“…It remains to be seen whether the proposals will discourage lifetime giving for those who are likely to have taxable estates. This is because any lifetime gifts to charity will not be taken into account for the purpose of satisfying the 10% test,” Mr Blower told Spears magazine.

“Further, the legislation will have to be very carefully drafted to ensure that a 4% reduction in inheritance tax offers sufficient incentive for individuals to structure their will in such a way so their estate can benefit from the proposed new regime,” he said.