How can charitable gifts make an estate work harder for all beneficiaries?

Raising £4 billion annually*, charitable gifts in Wills are crucial to sustaining a wide range of good causes and services – from hospices and homeless shelters to mental health helplines, emergency rescues, and more. In a challenging economic environment, and as these essential services face an ever-increasing demand, this income has never been more valued or more needed.

Steve Law, Senior Legacy Promotions Manager at Macmillan Cancer Support says:

“Charities exist to tackle the problems we see in the world and reach our ambitions of how we think things could be – but this takes money to achieve. The work charities do today is, in part, funded by the generous decisions made by people writing their Will many years prior. When times are tough financially, it’s wonderful that many consider the wide range of ways they can have a positive impact on the future, and it’s particularly humbling that so many consider leaving a gift in their Will.”

Public appetite for charitable gifts in Wills is also on the rise. Research from Remember A Charity, the consortium of some 200 charities, has found that almost one third (31%) of charity donors aged 40+ with a Will in place say they have included a gift to charity**. Importantly, there are great rewards for clients who choose to include a charitable bequest in their Will. The generous inheritance tax (IHT) reliefs associated with charitable estates are often central to conversations with Will-writing clients, and can have significant impact on how they may choose to structure their estate.

But what does this mean in practice? Ian Bond, Partner at Irwin Mitchell, explores how you can make an estate work harder for both family and friends as recipients, as well as charity beneficiaries.

How gifts in Wills affect IHT

Making gifts to qualifying charities in Wills can be an effective way to reduce the amount of IHT payable on the estate on death. Generally, IHT is payable at a rate of 40% on assets over the available nil-rate band (currently £325,000) and no other exemptions and reliefs are applied.

Charitable gifts can work to reduce the IHT payable in two ways:

  1. Gifts left to charity on death benefit from an exemption from IHT. This exemption extends to gifts of any asset, including cash, with the gift to charity reducing the value of the net estate chargeable to IHT;
  2. Since 6 April 2012, a reduced rate of IHT is applied where 10% or more of a deceased’s taxable estate is left to charity. A reduced rate of 36% will be applied to the balance of the estate not passing to charity.

The lower rate of IHT has proved attractive to many people and has encouraged them to increase the amount given to charity. And, when the numbers are worked through, the lower tax burden can often mean that more is received by the eventual non-charity beneficiaries of the estate. Let’s take a look at some examples in practice:

Example 1

Adam, a single person, dies leaving an estate of £425,000. Adam’s Will gives his estate to a friend Zoe. After allowing for a nil rate band (£325,000), Adam’s taxable estate is £100,000.

For Adam IHT is payable at 40% of his net estate; an IHT bill of £40,000. £385,000 passes to Zoe.

Example 2

We use the same facts, but this time Adam’s Will includes a charity legacy of £4,000. In this case, even if the donation is less than 10% of the estate, it will be effective in reducing the amount of IHT paid (as the donation is deducted from the net estate before working out the IHT payable).

After allowing for a nil rate band (£325,000), Adam’s IHT bill will be 40% of £38,400 (£100,000 – £4,000). This is an IHT saving of £1,600. After IHT, Zoe and the charity combined receive a total of £386,600 – Zoe getting £382,600 and the charity £4,000.

Example 3

In this final example, Adam now gives £10,000 as a charitable legacy – more than 10% of the taxable estate. After allowing for a nil rate band (£325,000), Adam’s IHT bill will be 36% of £32,400 (£100,000 – £10,000). After IHT Zoe and the charity receive a combined total of £392,600. Zoe receiving £382,600. The increase in the gift from £4000 to £10,000 to the charity has effectively cost Zoe nothing as a result of the IHT saving.


It is entirely possible for an individual to utilise a legacy gift to both reduce the amount of the estate that passes to the taxman and make a tax-efficient gift to charity. Legal advisers have a crucial role to play in making their clients aware of the options when it comes to charitable giving within a Will, and the associated IHT implications for their estate.

By incorporating conversations about charitable gifts as a standard part of the Will-writing process, not only can you support clients in taking care of everything that is important to them, but also enable the work of countless good causes to continue for generations to come.

Laura Jacques, Fundraising Manager – Legacy & Tribute at NSPCC says:

“Whilst we are living in times of economic uncertainty and financial constraints, gifts in Wills allow people to support a cause they care about without donating at a time when households are trying to cut back. It’s a common misconception that leaving money to charity is something that only the rich and famous do. But the truth is that people from all walks of life can leave a gift to a cause they care about.

Around a quarter of the NSPCC’s income comes from gifts in Wills. Leaving a gift in your Will is a big decision, your loved ones must come first, but if you are able to leave a little something to a cause you believe in, it means that they can continue to be there – whatever the future holds. Gifts left in people’s Wills help us tackle tomorrow’s challenges, whatever they may be.”

Find out more, and access tailored resources to aid in conversations about charitable estates on Remember A Charity’s website.

*Legacy Foresight, 2023

**Remember A Charity, OKO, Legacy Giving Consumer Benchmark Study

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