Families in the UK are increasingly opting to leave larger bequests to charities in their wills, a strategy that not only supports charitable causes but also reduces their inheritance tax (IHT) obligations. Last year, approximately £1.28 billion was saved on inheritance tax through such gifts, representing an 88% increase over the past six years, according to an analysis of government figures by TWM Solicitors.
Gifts made to charities are exempt from inheritance tax. Furthermore, individuals can reduce the standard 40% IHT rate to 36% by bequeathing at least one-tenth of their net estate—the portion subject to IHT—to charitable organizations. This tax benefit is available when the bequest meets the minimum threshold.
Currently, about 4-5% of estates are subject to death duties. This figure is projected to rise to 7% beginning in April 2027, when previously untaxed pension assets will be included in the calculation of liable assets. The current IHT thresholds stand at £325,000 per individual, or £500,000 if a home is left to direct descendants. These thresholds are doubled for couples, as spouses are exempt from IHT.
In the 2025-26 tax year, TWM Solicitors reported that £1.22 billion was saved on gifts to charities and property held in trust for charitable purposes. An additional £55 million was saved through the reduced 36% IHT rate.
Gillian Dunlea, a managing associate at TWM Solicitors, noted that the tax efficiency of charitable giving appeals to individuals concerned about their estate's IHT liability. She also highlighted the upcoming changes to pension taxation, advising clients to review their pension nominations alongside their wills, especially if they plan to make charitable gifts.
Dunlea also observed that many individuals prefer to make charitable bequests through their wills rather than during their lifetime, often due to concerns about future care costs or the desire to maintain their own income in later life. She suggested that this trend may also be influenced by the increasing financial independence of beneficiaries, such as adult children or grandchildren.
Ian Dyall, head of estate planning at Evelyn Partners, advised individuals making significant charitable gifts in their wills to verify if they qualify for the reduced 36% IHT rate. He explained that in some instances, a modest increase in the charitable donation could result in both the charity and the beneficiaries inheriting more, as the IHT savings can outweigh the additional gift amount. Dyall mentioned that such adjustments can even be made after a death through a deed of variation.
Dyall further elaborated on the choice between lifetime gifts and testamentary bequests. Gifts made during one's lifetime can benefit from Gift Aid, potentially reducing income tax liability. Substantial gifts made via a will can help secure the lower IHT rate on the entire estate.
When considering leaving money to charity, it is advisable to seek professional legal and financial advice to ensure the arrangements are structured correctly and align with personal wishes. It is also important to be aware of potential scams, such as fake charity will schemes, where fraudsters may pressure individuals into making donations to non-existent charities or obtain personal financial information. Genuine charities often offer free will-writing services, and individuals are encouraged to verify directly with trusted organizations. Making a will is crucial to ensure assets are distributed according to one's wishes, rather than by intestacy rules. Professional advice from solicitors, who are regulated, offers protection. Will-writing services can be a more affordable alternative, but it is important to choose reputable providers that are members of recognized professional bodies such as the Society of Trust and Estate Practitioners, the Institute of Professional Will Writers, the Society of Will Writers, or the Society of Later Life Advisers.