Leaving a legacy to charity in your will is a great way to support the causes that are close to your heart. It can also serve as a thank you for the support you, a loved one, or even a pet received during your lifetime.
Charities greatly rely upon this income. Today’s Wills and Probate reports that, across the top 1,000 legacy-supported charities, legacy gifts comprise 30% of their fundraising income.
This arrangement could also prove helpful to your beneficiaries. Charitable gifts are exempt from Inheritance Tax (IHT) and can help reduce your estate’s liability.
Discover how leaving a legacy can support a good cause while forming an effective part of your estate planning.
Charitable gifting can help your favourite cause, as well as potentially reduce your estate’s Inheritance Tax liability
Many of us have relied on a charity at some point in our lives. Choosing to champion a cause after your death is a wonderful way to give something back.
Gifting in this way can make a huge difference. Legacy giving organisation, Remember A Charity, states that currently, only 6% of people leave a gift to charity in their will. If this increased to 10%, it could generate a further £1 billion a year for good causes.
Charitable gifting appears to be on the rise. The research from Today’s Wills and Probate found that the number of estates leaving legacies has significantly increased over the past three years, with rises of:
1.3% in 2023
9% in 2024
22% in 2025.
While the sharp increase has been attributed to a cleared backlog in probate applications, the inclusion of unused pensions in estates for IHT purposes from April 2027 is likely to drive charitable giving even further.
In the 2025/26 tax year, the nil-rate band for an estate before IHT is due is £325,000. Above this threshold, assets are generally subject to IHT at 40%.
Leaving your main residence to your children, stepchildren, or grandchildren can extend the threshold to £500,000.
Meanwhile, if you leave anything above your nil-rate band to your spouse or civil partner, there’s no IHT liability. They can also inherit any unused portion of your nil-rate band, meaning you could pass on up to £1 million free from IHT between you.
These thresholds are frozen until at least 2030. This, combined with the inclusion of pensions in the IHT net, may increase your estate’s potential tax liability.
Fortunately, leaving a charitable donation in your will can help reduce your estate’s IHT burden.
Charitable gifts are completely exempt from IHT. Plus, if you donate 10% or more of your net estate to charity, the IHT rate on the remaining estate could drop to 36%.
Consider which charities to support, how to gift, and how to make your wishes clear
Gifting as a legacy is relatively straightforward. There’s a clear, three-step process you can follow to decide how to distribute your assets.
1. Choose which charity or charities you’d like to support
Charitable gifting is a deeply personal decision, and should reflect the causes closest to your heart. It could be a charity that supported you or your family during your lifetime, a cause you strongly believe in, or an animal charity if you’re a pet lover.
It’s important to check that whichever charity you choose is recognised as such by HMRC for tax purposes. You can do this by searching the Charity Commission’s online database for England and Wales.
Here, you can also access further information about the charity before making your final decision. You can view information about its trustees and see if its record and reputation reflect your own values.
2. Think about how your charitable gift will fit into your estate plan
There are three ways you can choose to leave a gift to charity:
Residuary gifts are a percentage share of the remainder of your estate after accounting for beneficiaries, taxes, debts, and other expenses such as funeral costs. If you leave 10% or more of your net estate to charity, this may reduce IHT to 36% instead of the standard 40%.
Pecuniary gifts are a fixed sum allocated to your chosen charities.
Nominated objects are specific items, such as jewellery, furniture, or property.
3. Decide how to express your wishes
The most common way to gift to a charity is by including your wishes in your will. This gives you control over exactly which charities to nominate and how you’d like to leave your gift.
You could also choose to write a letter of wishes. Although this isn’t legally binding, it’s an opportunity to expand on some of the decisions made in your will. For example, you could explain why these chosen charities are so important to you, or your reasoning behind leaving a specific gift.
Other options include:
A discretionary will trust, where your trustees are guided by your letter of wishes regarding your chosen charities. They retain discretion as to exactly how to make the gift.
A donor-advised fund, which can be used for gifting during your lifetime and as a legacy. Once money is received by the fund, it can only be used for charitable purposes. This method is often used if you’re gifting to charities outside the UK.
A deed of variation, which allows your beneficiaries to redirect their assets. They could choose to gift part of their inheritance to charity, either as a goodwill gesture or to reduce IHT liability, or both.
Clearly expressing which charity you’d like to support and how you want to make your gift is the best way of ensuring your chosen charity benefits in line with your wishes.
Get in touch
If you’d like to discuss how charitable gifting could work for you, please get in touch to talk to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.