Last updated: 14 October 2026
How does leaving money to charity reduce inheritance tax?
In two ways. First, anything you leave to a UK-registered charity in your will is completely exempt from inheritance tax (IHT), so it isn’t counted in your taxable estate. Second, if you leave at least 10% of your “baseline amount” to charity, the IHT rate on the rest of your taxable estate falls from 40% to 36%. In some estates, this means your family receives almost as much as they would have without the gift, while the charity gets a substantial sum.
The two reliefs
| Relief | How it works |
| Charity exemption | Gifts to charity on death or in your lifetime are exempt from IHT |
| Reduced rate | Estate pays 36% instead of 40% if 10% or more of the baseline amount goes to charity |
What is the baseline amount?
The baseline amount is your estate after deducting the nil rate band, any residence nil rate band, exemptions and reliefs, but before deducting the charity gift itself. You need to leave at least 10% of this figure to qualify for the 36% rate. Wording such as “such sum as is required to qualify for the reduced rate” can make sure the gift is enough, even if the estate’s value changes.
Example
Elaine dies in 2026 with an estate of £825,000. Her nil rate band is £325,000, and she has no residence nil rate band as she has no children. The baseline amount is £500,000.
- No charity gift: IHT of 40% on £500,000 = £200,000. Her beneficiaries get £625,000.
- 10% to charity (£50,000): taxable estate is £450,000 at 36% = £162,000. Beneficiaries get £613,000 and the charity gets £50,000.
So a £50,000 gift costs her family only £12,000.
Lifetime gifts to charity
Gifts to charity during your lifetime are also exempt from IHT and, with Gift Aid, give income tax relief. If you’re a higher-rate taxpayer, this can be more tax-efficient than waiting until death.
Which charities qualify
- UK-registered charities and community amateur sports clubs
- Charities in the EU or EEA no longer qualify for gifts made on or after 6 April 2024, following a change in the law
- Some national institutions, such as museums and universities
Practical points
- Make sure the charity’s name and registration number are correct in your will
- Review the gift if your estate changes significantly
- From April 2027, unused pension funds are included in the estate, which may change the baseline amount
- Executors claim the reduced rate on the IHT400 using schedule IHT430
Common mistakes
- Leaving a fixed cash amount that falls below 10% of the baseline when the estate grows
- Naming a charity that has merged or closed
- Forgetting that gifts to non-UK charities no longer qualify
- Not telling the executors about the reduced rate, so it is never claimed
A solicitor can draft a clause that adjusts the gift automatically so it always meets the 10% test.
Frequently asked questions
Can the 10% be split between several charities?
Yes, the total counts.
Do my executors need to claim the reduced rate?
Yes, it isn’t automatic.
Can my family vary my will to add a charity gift?
Yes, a deed of variation within 2 years of death can do this.
Does it apply to lifetime gifts?
The 36% rate only applies to estates on death.
Related: Gift Aid tax relief, reducing an estate below £2m and gifting money to reduce IHT.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with inheritance tax and charitable giving. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
