Charitable gifts in a Will can reduce inheritance tax, including the 10% rule which lowers the tax rate from 40% to 36%. This guide explains how charitable giving works in Wills, when it saves tax, and how to structure it properly. Written by Chiltern Wills LLP in Buckinghamshire.
Charitable Gifts in Wills: The Smart Way to Give More (and Potentially Pay Less Tax)
When people think about leaving money to charity in their Will, it’s usually a question of values: supporting a cause they care about, or leaving something meaningful behind.
What’s less widely understood is that charitable gifts can also play a very practical role in inheritance tax planning. Done properly, they can reduce the tax bill on an estate and, in some cases, even leave more overall for family.
Here are the key points worth knowing.
1. Charitable gifts are free from inheritance tax
This is the starting point.
Anything left to a qualifying charity in your Will is exempt from inheritance tax. That means:
- The gift itself is tax-free
- It reduces the taxable value of your estate
So even a modest charitable legacy can have a noticeable effect on the overall tax position.
That said, the rules are stricter than many people expect. To qualify, the gift must be:
- To a recognised charity (typically UK-registered)
- Given outright and unconditionally
- Not dependent on conditions that might fail
In practice, this is one of those areas where careful drafting matters. A well-meaning but poorly structured clause can accidentally lose the tax relief.
2. The 10% rule: a powerful but underused option
This is where things get interesting.
If you leave at least 10% of your net estate to charity, the rate of inheritance tax on the rest of your estate drops from 40% to 36%.
At first glance, giving more away to save tax might seem counter-intuitive. But in some cases:
- The charity receives a meaningful gift
- The tax bill is reduced
- The overall impact on your family is smaller than expected
It’s not a blanket rule that suits everyone, but it is something worth actively considering.
3. It’s not as simple as “10% of everything”
Unfortunately, this isn’t a back-of-an-envelope calculation.
For inheritance tax purposes, your estate is divided into different components, including:
- Your general estate (most assets)
- Jointly owned assets passing automatically
- Certain trust interests
The 10% test is applied using a technical calculation rather than a simple percentage of your total wealth.
In plain English:
This is why Wills often use carefully drafted formula clauses rather than a fixed percentage. The clause ensures the correct figure is calculated at the time of death, based on the actual estate.
4. A useful twist: merging components
One of the more technical, but surprisingly valuable, points is this:
If the 10% threshold is comfortably met in one part of the estate, it may be possible to merge components so the lower 36% tax rate applies more widely.
This requires agreement between the relevant parties, but when used appropriately it can reduce the overall tax bill further.
5. The 2026 rule change to be aware of
From 6 April 2026, there is an important tightening of the rules.
Where assets are left for charitable purposes via a trust, the inheritance tax exemption will only apply if the funds ultimately go to UK-registered charities.
In practical terms:
- General “charitable purpose” trusts need to be handled more carefully
- Executors may need to distribute funds within two years
- Letters of wishes alone will not secure the tax exemption
For anyone with older Wills or more flexible charitable provisions, this is worth reviewing.
6. Even after death, it’s not too late to fix things
There’s also a useful safety net.
Within two years of death, beneficiaries can sometimes use a deed of variation to redirect part of an inheritance to charity.
This can be particularly helpful where:
- The estate narrowly misses the 10% threshold
- A small adjustment would unlock the lower 36% tax rate
In the right case, a relatively modest change can improve the overall outcome.
So, should you include a charitable gift?
There isn’t a one-size-fits-all answer.
But in estates where inheritance tax is likely, it is worth asking:
- Am I already planning to give something to charity?
- Would increasing that slightly reduce the overall tax burden?
- Could a properly structured clause improve the outcome for both family and charity?
The key is to approach it deliberately, rather than as an afterthought.
A final practical point
Charitable clauses are one of those areas where DIY or overly generic wording can easily go wrong. Small technical issues can mean:
- The tax relief is lost
- The gift does not work as intended
- Executors face unnecessary complications
Handled properly, though, they can be both tax-efficient and meaningful.
Thinking about making or updating your Will?
If you are considering including a charitable gift, or simply want to make sure your Will is structured in a sensible and tax-efficient way, Chiltern Wills can help. We work with clients across Buckinghamshire and the Chilterns to prepare clear, practical Wills without unnecessary complexity.
If you would like to get started, the best way to make an enquiry is by email. Please include a brief outline of what you are looking to do, and we will come back to you with next steps and fees.
Frequently Asked Questions: Charitable Gifts in Wills
Do charitable gifts in a Will reduce inheritance tax?
Yes. Gifts to qualifying charities are free from inheritance tax and reduce the value of your taxable estate.
What is the 10% rule for inheritance tax?
If you leave at least 10% of your net estate to charity, the inheritance tax rate on the rest of your estate reduces from 40% to 36%.
Does leaving 10% to charity mean my family gets less?
Usually yes, but often by less than expected because of the reduced tax rate.
How is the 10% calculated?
It is not simply 10% of everything you own. The calculation is based on a technical figure worked out after allowances and reliefs, which is why proper drafting is important.
Can I choose any charity in my Will?
You can choose any qualifying charity, but it should be properly registered. Your Will can name specific charities or allow your executors to choose.
What happens if the charity no longer exists?
If your Will shows a general charitable intention, your executors can redirect the gift to a similar charity.
Can a charitable gift be added after death?
Sometimes. Within two years, a deed of variation may allow part of an inheritance to be redirected to charity.
Do I need professional help for this?
It is strongly recommended. Proper drafting ensures the tax relief applies and avoids problems later.
How do I get started?
Email Chiltern Wills LLP with a brief outline of your situation and we will come back to you with next steps and fees.
