Legal News | 9.07.26
Time to review your charitable giving?
Gifts made to qualifying charities can benefit from a full exemption from inheritance tax (IHT). This applies to both gifts made during lifetime and through a person’s Will. According to recent statistics published by the Government, the cost of this exemption to the Exchequer stood at £1.28 billion for the tax year 2025/6, marking a 6% increase from the previous year.
How does the exemption work?
The IHT rules exempt gifts to qualifying charities or registered community sports club so long as certain conditions are satisfied. The rules have been subject to various changes in recent years. For instance, from 1 April 2024, gifts made to charitable bodies outside the UK can no longer be exempt for IHT purposes. Prior to changes made in the Finance Act 2026, property was also considered as “given to charities” if it was held on trust for charitable purposes only. However, that has again changed and to qualify, the recipient trust itself needs to be a registered charity.
The 10% rule
One often overlooked aspect of charitable giving is the possibility for a person to leave 10% of their net estate (after debts, funeral expenses, available allowances, exemptions and reliefs) to charity. This can reduce the IHT rate in the taxable estate from 40% to 36% and therefore be a very valuable way to support the charities you care about while reducing the overall IHT burden. From 6 April 2027, unused pension funds and certain death benefits will form part of a person’s estate for IHT purposes and, consequently, a larger charitable gift may be needed to secure this lower IHT rate. This may be particularly pertinent where substantial pension funds are involved and where it will be crucial for personal representatives to work closely with pension scheme administrators.
Various rule changes in recent years make now an important time to review your own IHT planning (particularly where charitable gifts are concerned). If you would like to discuss charitable giving or to review your existing estate planning in light of recent changes, please do get in touch with our Private Client Team at wealth@wansbroughs.com.
