Inheritance Tax Savings from Charitable Gifts Rise 88% to £1.28bn
UKPulse Money Desk
Taxpayers are saving significantly more on Inheritance Tax (IHT) by including charitable gifts in their wills, with savings increasing by 88% over six years.
- The amount saved on IHT through charitable giving has risen to £1.28 billion, up from £680 million in 2020-21.
- Gifts to charity in a will are exempt from IHT, and leaving at least 10% of the remaining estate to charity can reduce the IHT rate on the rest from 40% to 36%.
- From April 2027, most unused pensions will be included in estates for IHT purposes, potentially increasing the taxable value of many estates.
Savings on Inheritance Tax (IHT) through charitable gifts in wills have increased by 88% over the past six years, reaching £1.28 billion. This figure is up from £680 million recorded in 2020-21, according to an analysis of government data by TWM Solicitors.
Gifts made to charity in a will are exempt from IHT. Furthermore, if at least 10% of the remaining estate is left to charity, the IHT rate on the rest of the estate can be reduced from 40% to 36%.
From April 2027, most unused pensions will be included in estates for IHT calculations. This change could increase the overall taxable value of many estates, potentially making charitable giving a more significant consideration for some families.
For deaths on or after 6 April 2026, gifts must generally go directly to qualifying UK charities or sports clubs to be eligible for IHT relief. Gifts made through certain charitable trusts may no longer qualify following a change in the autumn budget.
Why this matters: The rise in IHT savings through charitable giving highlights a growing trend in estate planning, which could become more relevant as changes to pension inclusion in estates take effect.
What this means for you: If you are considering leaving a gift to charity in your will to reduce your IHT bill, it may be advisable to seek professional advice to ensure your will is drafted correctly and the gift meets the 10% threshold for a lower tax rate.