Families are increasingly directing portions of their estates to charitable causes in their wills, not only for philanthropic reasons but also to reduce their inheritance tax (IHT) liabilities. According to an analysis of government figures by TWM Solicitors, the amount saved on IHT through charitable giving has surged by 88% over the past six years, reaching an annual total of £1.28 billion.
Under current tax law, gifts made to charities are exempt from IHT. Furthermore, individuals can reduce the standard 40% inheritance tax rate to 36% by bequeathing at least one-tenth of their net estate—the portion subject to IHT—to charity. Currently, approximately 4-5% of estates incur death duties, a figure projected to rise to 7% by April 2027, following the inclusion of unspent pensions in assets liable for IHT.
The standard IHT thresholds begin at £325,000 per person, or £500,000 if a home is left to direct descendants. These thresholds can be doubled for couples, as spouses are exempt from IHT.
For 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, with an additional £55 million attributed to the reduced 36% tax rate.
Gillian Dunlea, a managing associate at TWM Solicitors, noted that the appeal of charitable giving for IHT planning is growing. She advised that with pensions becoming subject to IHT from 2027, individuals should review their pension nominations alongside their wills, especially if they intend to include charitable gifts in their estate planning. Dunlea also observed that many prefer to make charitable bequests in their wills rather than during their lifetime, potentially due to concerns about future care costs or a desire to retain income in later life. She added that beneficiaries, often adult children or grandchildren who are financially independent, may also influence this trend.
Ian Dyall, head of estate planning at Evelyn Partners, suggested that individuals already making substantial charitable gifts in their wills should verify if they qualify for the reduced 36% IHT rate. He pointed out that in some instances, a modest increase in a charitable donation could result in both the charity and other beneficiaries inheriting more, as the IHT reduction outweighs the additional gift. Dyall mentioned that such adjustments can even be made posthumously through a deed of variation.
Dyall also elaborated on the decision between lifetime gifts and bequests via a will. Lifetime gifts may benefit from Gift Aid, potentially reducing income tax liability, while significant bequests in a will can secure the reduced IHT rate for the entire estate. He advised seeking legal and financial counsel to properly structure charitable gifts within a will.
Consumers are also cautioned about fraudulent charity will schemes, where scammers pose as charities to pressure individuals into leaving money to fake organizations, steal personal information, or impose hidden fees. The government-backed MoneyHelper website advises checking directly with trusted charities regarding genuine free will schemes. It also emphasizes the importance of having a will to ensure assets are distributed according to personal wishes, rather than by intestacy rules. MoneyHelper provides guidance on choosing reputable will-writing services, recommending membership in organizations such as the Society of Trust and Estate Practitioners, the Institute of Professional Will Writers, the Society of Will Writers, and the Society of Later Life Advisers.