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Charity Legacy Planning: Tax Efficiency and IHT Reduction Strategies

· 22 min

Executive Summary

Charitable legacy planning operates across three interconnected IHT regimes -- the unlimited charity exemption under IHTA 1984 s.23, the 36% reduced rate introduced by Finance Act 2012 Schedule 1A, and post-death charitable giving via deeds of variation under s.142 -- yet the technical complexity of each regime, and the interactions between them, remain widely misunderstood by practitioners. With IHT receipts reaching a record GBP 8.2 billion in 2024-25 and the OBR forecasting GBP 14.5 billion by 2030-31, charitable planning is becoming central to estate tax mitigation.12 The Autumn Budget 2025 restricted the s.23 exemption for charitable trusts and non-UK charities, creating immediate will review obligations.3 This article provides forensic analysis of the baseline amount calculation, component election mechanics, and the post-Budget 2025 landscape, equipping tax advisors with the technical precision required for optimal charitable giving strategies.

1. The Charitable IHT Opportunity in Context

IHT receipts have reached levels that make charitable planning relevant to a substantially broader client base than the specialist niche it once occupied. Full-year receipts for 2024-25 totalled GBP 8.2 billion, a record figure representing a GBP 750 million increase on the prior year.1 Provisional data for April 2025 to January 2026 shows GBP 7.1 billion collected in ten months, GBP 0.1 billion ahead of the equivalent period in 2024-25.1 The OBR forecasts receipts of GBP 8.7 billion for 2025-26, rising to GBP 14.5 billion by 2030-31 -- a 67% increase over five years driven by frozen thresholds, rising asset values, and the inclusion of pension death benefits from April 2027.2

The nil-rate band has been frozen at GBP 325,000 since 2009-10, with the residence nil-rate band fixed at GBP 175,000. Both freezes have been extended to 2030-31 via the Finance (No.2) Bill 2025-26.4 Fiscal drag is the predictable consequence: HMRC data for 2022-23 show 31,500 estates (4.62% of UK deaths) incurring an IHT charge, generating aggregate liabilities of GBP 6.70 billion.5 The OBR estimates an additional 31,200 estates will enter IHT scope from April 2027 when pension death benefits become chargeable, with the proportion of estates facing IHT nearly doubling by 2030.2

Against this fiscal backdrop, charitable giving as a tax mitigation strategy is materially underutilised. HMRC statistics for 2022-23 record transfers to qualifying charities of GBP 1.92 billion, claimed by 10,800 estates -- down from GBP 2.07 billion in 2021-22.5 The Remember a Charity Professional Adviser Tracking Study (2025) confirms shifting demand: 60% of the 237 surveyed solicitors, will-writers, and IFAs report receiving increased estate planning requests, with 65% expecting charitable tax incentives to become more important to clients.6 Notably, 77% of solicitors and will-writers now proactively raise the charitable option with clients, up from 72% in 2023, and 21% of wills written include charitable donations.6

Three interconnected regimes govern charitable IHT planning: the unlimited charity exemption (IHTA 1984 s.23), the 36% reduced rate (Schedule 1A), and post-death variation (s.142). Each regime has distinct qualification criteria, interaction effects, and -- following Budget 2025 -- new restrictions that demand forensic attention from practitioners advising on estate tax efficiency.

2. The Charity Exemption: IHTA 1984 Section 23

2.1 Statutory Framework

Section 23 of IHTA 1984 provides that transfers of value are exempt to the extent that the values transferred are attributable to property given to charities or registered community amateur sports clubs (CASCs).7 The exemption is unlimited in value and applies to both lifetime transfers and transfers on death.8 Property qualifies as "given to charities" if it becomes the property of charities or is held on trust for charitable purposes only, though this latter route has been materially restricted by Budget 2025 (addressed in Section 6 below).7

The exemption distinguishes charitable gifts from potentially exempt transfers (PETs) in a critical respect: charitable gifts are immediately exempt from IHT at the point of transfer, with no 7-year survival requirement.8 This immediacy makes lifetime charitable giving an efficient mechanism for estate reduction where clients have philanthropic intent. There is no cap on the exemption value, and the gift removes the transferred property from the estate for all IHT purposes.

2.2 Conditions and Restrictions

Section 23(2) imposes conditions that, if breached, deny the exemption.7 The exemption does not apply where the gift takes effect only after the termination of an interest or time period, where it depends on conditions not satisfied within 12 months of the transfer, or where the disposition is defeasible. A 12-month safe harbour applies to defeasibility: if undefeated after 12 months and no longer defeasible, the gift is treated as not defeasible.7 The exemption is also denied where the donor retains less than full ownership interest, where property is given for a limited period, where land or buildings carry reserved interests allowing rent-free or below-market occupation, or where property may become applicable for non-charitable purposes.7

2.3 Lifetime Giving: Income Tax Synergies

Lifetime charitable gifts deliver dual tax efficiency. Beyond the immediate IHT exemption under s.23, Gift Aid enables the charity to reclaim basic rate tax (20%), while higher-rate taxpayers claim additional 20% relief and additional-rate taxpayers claim 25% relief.9 Gifts of qualifying shares, securities, and land attract income tax relief equal to the market value of the donated asset plus incidental disposal costs, less any consideration received.9 Where clients maintain regular charitable giving, the normal expenditure out of income exemption (IHTA 1984 s.21) provides a complementary exemption, functioning as a belt-and-braces alongside s.23.10

2.4 Drafting Implications

Following the Budget 2025 restrictions on charitable trusts and non-UK charities (Section 6), the safest drafting approach for testamentary charitable gifts is to name specific UK-registered charities directly rather than directing gifts to trusts for charitable purposes.11 Practitioners should verify the registered charity number of each named beneficiary and include fallback provisions in case a named charity ceases to exist or loses registration before the testator's death.

3. The 36% Reduced Rate: Schedule 1A Mechanics

3.1 Legislative Framework

Finance Act 2012 Schedule 33 inserted Schedule 1A into IHTA 1984, introducing a reduced IHT rate of 36% -- down from the standard 40% -- where the donated amount equals at least 10% of the baseline amount for one or more estate components.1213 The reduced rate applies only to charges arising on death for individuals dying on or after 6 April 2012; it does not apply to lifetime transfers.13

3.2 The Three Estate Components

Schedule 1A paragraph 3 divides the estate on death into three components for the purposes of the 10% test.14 The general component comprises the free estate -- all property not falling into the other two categories. The survivorship component consists of jointly owned property passing by survivorship. The settled property component captures property in which the deceased held a qualifying interest in possession.14 The 10% test applies separately to each component: a component that passes the test attracts the 36% rate, while components that fail remain at 40%.

3.3 Baseline Amount Calculation

The baseline amount for each component is calculated under Schedule 1A paragraph 5 as follows.15 First, take the value attributable to the component. Second, deduct the proportionate nil-rate band and transferable nil-rate band -- but critically, do not deduct the RNRB or transferable RNRB. Third, add back the charitable gift within that component. The resulting figure is the baseline amount against which the 10% test is applied.15

The exclusion of the RNRB from the baseline calculation is the single most common practitioner error in applying the 36% rate.16 Deducting the RNRB reduces the apparent baseline, producing a charitable gift target that is too low to meet the 10% threshold. The consequence is a charitable gift that falls marginally short of qualification, denying the estate the rate reduction and producing no compensating benefit.

Worked Example A: Baseline Calculation with RNRB Exclusion

Consider the estate of Robert, with the following values (adapted from IHTM45010):15

  • Estate value: GBP 750,000
  • Charitable legacy (to the National Trust): GBP 50,000
  • Chargeable transfer: GBP 700,000 (GBP 750,000 less GBP 50,000)
  • NRB: GBP 325,000
  • After NRB deduction: GBP 375,000 (GBP 700,000 less GBP 325,000)
  • Baseline amount: GBP 425,000 (GBP 375,000 plus GBP 50,000 charitable gift added back)
  • 10% of baseline: GBP 42,500
  • Donated amount (GBP 50,000) exceeds 10% threshold (GBP 42,500): qualifies
  • IHT at 36%: GBP 135,000 (compared with GBP 150,000 at 40%)
  • IHT saving: GBP 15,000

Had Robert been entitled to a GBP 175,000 RNRB and an advisor wrongly deducted it from the baseline, the apparent baseline would have been GBP 250,000, producing a 10% threshold of GBP 25,000. While the GBP 50,000 gift would still have qualified in this example, for estates closer to the margin the error would be determinative.

3.4 The Charity Paradox

The interaction between the charitable gift and the rate reduction creates what might be termed the "charity paradox": a charitable bequest can simultaneously reduce IHT and increase the net amount passing to family beneficiaries relative to the cost of the gift.

Worked Example B: Charity Paradox

Consider an estate of GBP 1,000,000 (single individual, no RNRB, full NRB of GBP 325,000):

Without charitable gift:

  • Chargeable estate: GBP 1,000,000 less GBP 325,000 NRB = GBP 675,000
  • IHT at 40%: GBP 270,000
  • Net to family: GBP 730,000

With charitable gift of GBP 45,000:

  • Chargeable estate: GBP 1,000,000 less GBP 45,000 charity less GBP 325,000 NRB = GBP 630,000
  • Baseline amount: GBP 630,000 plus GBP 45,000 = GBP 675,000
  • 10% of baseline: GBP 67,500
  • Donated amount (GBP 45,000) is below 10% threshold: does not qualify

The gift must be recalibrated. At GBP 68,000:

  • Chargeable estate: GBP 1,000,000 less GBP 68,000 less GBP 325,000 = GBP 607,000
  • Baseline amount: GBP 607,000 plus GBP 68,000 = GBP 675,000
  • 10% of baseline: GBP 67,500
  • Donated amount (GBP 68,000) exceeds 10%: qualifies
  • IHT at 36%: GBP 218,520
  • Net to family: GBP 713,480

The effective cost to the family is GBP 16,520 (GBP 730,000 less GBP 713,480), while the charity receives GBP 68,000 and IHT is reduced by GBP 51,480. The charitable gift delivers GBP 3.12 of IHT reduction for every GBP 1 of cost to beneficiaries. This counterintuitive arithmetic is the most compelling argument for charitable legacy planning in practitioner-client discussions.12

3.5 Grossing Up

Schedule 1A paragraph 6(1) provides that for the purpose of establishing whether the 10% test is met, the grossing up calculation uses the lower 36% rate rather than the standard 40%.17 This creates circularity: the applicable rate depends on whether the test is met, but the test outcome depends on the rate used for grossing up. Grossing up at 36% produces a larger baseline amount than grossing up at 40%, potentially enabling qualification where the standard rate calculation would not.17 In practice, the circularity resolves iteratively, and the HMRC online reduced rate calculator handles this automatically.18

3.6 The STEP Model Clause

HMRC recognises the STEP model clause for wills designed to automatically satisfy the 10% test (IHTM45008).19 The model wording directs a gift equal to a specified percentage of the baseline amount for the relevant component or aggregate of components. It includes minimum and maximum provisions to protect both the charity (guaranteeing a minimum gift) and family beneficiaries (capping the charitable gift where estate values are unexpectedly high).19 HMRC states it will "look carefully at clauses" with wording variations, making adherence to the STEP model essential for predictable outcomes.19

A critical drafting distinction must be emphasised: a clause directing "10% of residue" is not equivalent to "10% of baseline amount." The residuary estate is the value remaining after all debts, expenses, and specific legacies. The baseline amount, by contrast, adds back the charitable gift and excludes the RNRB but not the NRB. Wills containing "10% of residue" clauses may fail the 10% baseline test and should be reviewed.16

4. Component Elections and Multi-Asset Estates

4.1 Opt-In Merging Elections

Schedule 1A paragraph 7 permits an opt-in (merging) election where one component's donated amount exceeds 10% of its baseline.20 The excess can be transferred to another component to help that component also qualify for the 36% rate. The election requires the written consent of all persons liable for IHT on both components and must be made within two years of death.20

Worked Example C: Component Merging

Consider an estate with two components:

  • General component: GBP 600,000 (charitable gift of GBP 40,000)
  • Survivorship component: GBP 400,000 (no charitable gift)
  • NRB allocated: GBP 195,000 to general, GBP 130,000 to survivorship (proportionate)

General component:

  • Baseline: (GBP 600,000 less GBP 195,000 NRB less GBP 40,000 charity) plus GBP 40,000 = GBP 405,000
  • 10% of baseline: GBP 40,500
  • Donated amount (GBP 40,000) falls marginally short: does not qualify without election

The practitioner may restructure the gift to GBP 41,000 to satisfy the general component test. With GBP 41,000 donated:

  • Baseline: (GBP 600,000 less GBP 195,000 less GBP 41,000) plus GBP 41,000 = GBP 405,000
  • 10%: GBP 40,500; donated GBP 41,000: qualifies (excess: GBP 500)

However, the survivorship component baseline is GBP 270,000 (GBP 400,000 less GBP 130,000 NRB), requiring a donated amount of GBP 27,000 to qualify. The GBP 500 excess from the general component is insufficient for merging. This illustrates a practical limitation: merging elections are effective only where the excess in the qualifying component is substantial relative to the non-qualifying component's threshold.20

4.2 Opt-Out Elections

Schedule 1A paragraph 8 provides an opt-out election: those liable for tax on a component may elect for it to be treated as if the donated amount is below 10%, even where it actually exceeds the threshold.21 This election is rational where the cost of the charitable gift required to meet 10% in a particular component exceeds the IHT saving from the rate reduction on that component. For a small component with a modest chargeable value, the 4 percentage point reduction may yield a saving of only a few hundred pounds, while the charitable gift threshold may run to several thousand. The opt-out preserves the charitable gift for the charity while applying the standard 40% rate to the component.21

Elections -- whether opt-in or opt-out -- must be made in writing within two years of death. Withdrawal of an election is permitted within two years and one month.20 Form IHT430 accompanies form IHT400 for claiming the reduced rate, with dedicated sections for each component, baseline calculations, and election declarations.18

5. Post-Death Charitable Giving: Section 142 Variations

5.1 Mechanics

IHTA 1984 s.142 permits any disposition of property in the deceased's estate to be varied by written instrument within two years of death, provided the variation is made by the beneficiaries, contains a statement that s.142(1) shall apply, and is not made for consideration in money or money's worth.22 The variation is treated as if made by the deceased for both IHT and CGT purposes.22 From instruments executed on or after 1 August 2002, the statement of intent under s.142(1) is a mandatory formal requirement (IHTM35028).23

5.2 Retroactive Qualification for the 36% Rate

A deed of variation redirecting inheritance to charity qualifies for the s.23 charity exemption as if the deceased had made the gift.22 Where the redirected amount is sufficient to meet the 10% baseline test, the estate retroactively qualifies for the 36% reduced rate.24 This creates a significant post-death planning opportunity: beneficiaries who inherit an estate charged at 40% can redirect funds to charity via a deed of variation, reducing the rate to 36% and potentially increasing the net amount retained by the family.

Worked Example D: Post-Death Variation

Estate of GBP 900,000, single individual, no charitable provision in will:

Original position (40% rate):

  • Chargeable: GBP 900,000 less GBP 325,000 NRB = GBP 575,000
  • IHT at 40%: GBP 230,000
  • Net to family: GBP 670,000

After deed of variation redirecting GBP 58,000 to charity:

  • Baseline: (GBP 575,000 less GBP 58,000) plus GBP 58,000 = GBP 575,000
  • 10% of baseline: GBP 57,500
  • Donated amount (GBP 58,000): qualifies
  • Chargeable: GBP 575,000 less GBP 58,000 = GBP 517,000
  • IHT at 36%: GBP 186,120
  • Net to family: GBP 655,880
  • Family cost: GBP 14,120 (GBP 670,000 less GBP 655,880)
  • IHT saving: GBP 43,880
  • Charity receives: GBP 58,000

The IHT saving (GBP 43,880) exceeds the family's effective cost (GBP 14,120) by a factor of 3.1, by virtue of the combined effect of the rate reduction and the charity exemption. The effective cost to the family represents approximately 24% of the charitable gift (GBP 58,000), demonstrating the leveraged benefit of combining the two reliefs.24

5.3 Practical Requirements

From 6 April 2012, the charity must be notified of any deed of variation redirecting property to it for the s.23 exemption to apply.22 All beneficiaries who would be adversely affected by the variation must consent; where a beneficiary is a minor, court approval is required. A variation cannot be made for consideration, and only one variation per disposition is permitted.23

Form IHT408 provides a simplified alternative to a full deed of variation for household and personal goods donated to charity by beneficiaries.25 The IHT408 window is 12 months from death -- shorter than the two-year s.142 period -- and applies only to qualifying chattels.

6. Budget 2025: Charitable Trust and Non-UK Charity Restrictions

6.1 Charitable Trust Restriction

The Autumn Budget 2025 introduced a material restriction to the s.23 exemption. From 26 November 2025 (lifetime transfers) and 6 April 2026 (transfers on death), the exemption no longer applies to gifts held on trust for charitable purposes unless the trust itself qualifies as a registered UK charity.3 Previously, gifts to trusts established "for charitable purposes only" qualified automatically under the broader s.23 wording; the amendment removes this route for new arrangements.11 These provisions are contained in the Finance (No.2) Bill 2025-26, which was in committee stage at the time of writing. The lifetime provisions took effect from Budget Day (26 November 2025) via ministerial statement; the death provisions effective 6 April 2026 are contingent on Royal Assent.11

Section 23 will be amended to remove references to trusts for charitable purposes or for CASC purposes, narrowing the exemption to direct gifts to registered entities.11 The government estimates fewer than 50 estates will be affected, though practitioner assessment suggests the actual impact is substantially larger, particularly for estates with existing discretionary charitable trust provisions in wills.3

6.2 Non-UK Charity Restriction

The IHT charity exemption has been restricted to gifts made directly to UK charities and CASCs.26 Lifetime gifts to non-UK charitable entities lost exemption from 26 November 2025.26 This aligns with the broader government restriction of charitable reliefs to UK charities announced at Budget 2025, affecting income tax Gift Aid, capital gains tax relief, and IHT exemption simultaneously.26

For internationally mobile clients -- particularly those affected by the residence-based IHT regime enacted from 6 April 2025 -- this restriction has particular significance. Long-term UK residents with philanthropic connections to overseas charities must restructure giving through UK-registered intermediaries or accept the loss of IHT exemption.26

6.3 Transitional Provisions

Interest in possession trusts established before 26 November 2025 receive protection under a transitional provision.3 Where, on a subsequent transfer of value, the trust property is held on trust only for charitable purposes, the charity exemption still applies provided trustees distribute assets to qualifying UK charities within two years of the transfer date.3 A new s.23 subsection will preserve the exemption when an existing interest in possession ends in favour of a charitable or CASC purpose trust which distributes to a registered charity or CASC.11

6.4 Practical Will Review Obligations

The immediate practical consequence for tax advisors is a comprehensive will review obligation. Existing wills containing discretionary charitable trusts may lose exemptions unless the trust is itself registered as a UK charity or executors distribute to named charities within two years of death.3 Practitioners should identify all client wills with charitable trust provisions, assess whether the trusts meet the new registration requirement, and where they do not, advise clients on redrafting to name specific UK-registered charities directly. For wills executed before the announcement, the transitional provisions offer a two-year distribution window, but reliance on transitional relief introduces execution risk that direct naming avoids.

7. Strategic Integration: APR/BPR, Pensions, and Charitable Planning

7.1 APR/BPR Reform Interaction

From 6 April 2026, agricultural property relief and business property relief are subject to a combined GBP 2.5 million allowance for 100% relief, with 50% relief thereafter.27 Where qualifying agricultural or business property passes on death and the estate also includes charitable gifts, the interaction requires careful modelling. APR/BPR reduces the chargeable estate, which reduces the baseline amount: a charitable gift calibrated at "10% of baseline" will be smaller in absolute terms where APR/BPR is also claimed.27 Advisors must calculate the baseline amount after applying APR/BPR to determine whether existing charitable gift provisions continue to meet the 10% threshold.

7.2 Pension Inclusion from April 2027

Pension death benefits entering the IHT estate from April 2027 will increase estate values for many clients, with the OBR estimating 31,200 additional estates brought into scope.2 The increased estate value amplifies the baseline amount, requiring larger charitable gifts in absolute terms to meet the 10% test. However, the compound effect operates in both directions: larger taxable estates also amplify the benefit of the 4 percentage point rate reduction, making charitable planning proportionally more valuable for higher-value estates.2 Practitioners should model the impact of projected pension values on existing charitable legacy provisions and recalibrate where the 10% threshold is at risk.

7.3 Residence-Based IHT Regime

From 6 April 2025, IHT is assessed on a residence basis rather than domicile, with long-term UK residents (10 of the previous 20 tax years) subject to IHT on worldwide assets.28 For long-term UK residents, the charity exemption remains fully available. The restriction of charitable exemption to UK charities is particularly relevant for internationally mobile individuals who may have philanthropic connections with overseas charities and who now face IHT on worldwide assets without the ability to direct those assets to non-UK charitable entities with IHT exemption.26

7.4 Practitioner Checklist

Tax advisors reviewing charitable legacy planning in the post-Budget 2025 environment should address the following: (1) verify the UK registration status of all charities named in client wills; (2) review all charitable trust provisions for compliance with the amended s.23; (3) calculate the baseline amount per component, correctly excluding the RNRB; (4) model the 10% threshold including the impact of APR/BPR reform and projected pension values; (5) consider the STEP model clause for new wills to guarantee automatic qualification; (6) document post-death variation opportunities for executors and beneficiaries, including the charity notification requirement; and (7) for multi-component estates, model opt-in merging and opt-out elections to determine the optimal strategy per component.

Conclusion

Charitable legacy planning is among the most powerful yet technically demanding IHT reduction mechanisms available in the current fiscal environment. The three interconnected regimes -- the unlimited s.23 charity exemption, the 36% reduced rate under Schedule 1A, and post-death variation under s.142 -- offer substantial tax efficiency, but only where practitioners navigate the technical requirements with forensic precision.

The 36% reduced rate is not automatic. It demands the 10% baseline test to be met per component, with the baseline calculated by excluding the RNRB but including the charitable gift add-back -- a calculation that continues to generate practitioner errors. The STEP model clause provides the safest will drafting approach, while the opt-in and opt-out elections enable strategic optimisation across multi-component estates. Post-death variation under s.142 provides a two-year window for retroactive charitable planning that can reduce both the IHT rate and the effective cost of the charitable gift to family beneficiaries.

Budget 2025 has introduced restrictions that require immediate attention: charitable trust provisions in wills must be reviewed against the amended s.23, and non-UK charity gifts no longer attract IHT exemption. The convergence of these changes with APR/BPR reform from April 2026 and pension inclusion from April 2027 means that charitable planning thresholds require recalculation for a substantial proportion of IHT-exposed estates. Form IHT430 for reduced rate claims, form IHT408 for donated goods, and the HMRC online reduced rate calculator provide the procedural tools for implementation.1825

The fiscal trajectory is unambiguous: frozen thresholds, expanding IHT scope, and rising asset values will draw more estates into the IHT net each year through to 2030-31. For tax advisors, the technical mastery of charitable planning across all three regimes is no longer a specialist skill -- it is a core advisory competency.

CPD Declaration

Estimated Reading Time: 22 minutes Technical Level: Advanced Practice Areas: Inheritance Tax, Estate Planning, Charitable Giving, Trust Taxation

Learning Objectives

Upon completing this article, practitioners will be able to:

  1. Calculate the baseline amount for each estate component under IHTA 1984 Schedule 1A, correctly excluding the RNRB, to determine whether the 10% test for the 36% reduced rate is satisfied
  2. Evaluate the interaction between the Budget 2025 charitable trust restrictions and existing will provisions to identify clients requiring immediate will review
  3. Apply the s.142 deed of variation mechanism to post-death charitable giving, including the requirements for charity notification and the retroactive qualification for the 36% reduced rate
  4. Analyse the impact of APR/BPR reform and pension inclusion on charitable legacy planning thresholds and advise clients on recalibrating testamentary provisions

Competency Mapping

  • ICAEW Code of Ethics: Professional Competence and Due Care (Section 113)
  • PCRT Standards: Standard for Tax Planning (Professional Conduct in Relation to Taxation)
  • ATT Professional Standards: Technical Competency in IHT Advisory

Reflective Questions

  1. How would the inclusion of pension death benefits from April 2027 affect the baseline amount calculation for estates currently structured to meet the 10% charitable giving threshold?
  2. What steps should be taken to review existing client wills containing discretionary charitable trusts in light of the Budget 2025 restrictions on the s.23 exemption?
  3. In what circumstances would an opt-out election under Schedule 1A paragraph 8 produce a better outcome for both family beneficiaries and charitable causes than maintaining the 36% reduced rate?

Professional Disclaimer

The information presented reflects the regulatory and legislative position as of 26 February 2026. Regulations, tax rules, and professional guidance are subject to change. Readers should independently verify all information before acting and seek advice from appropriately qualified solicitors, financial advisors, or other professionals for their specific circumstances.

Neither WUHLD nor the author accepts liability for any actions taken or decisions made based on the content of this article. Professional readers are reminded of their own regulatory obligations and duty of care to their clients.

Footnotes

Footnotes

  1. HMRC Tax Receipts and National Insurance Contributions Monthly Bulletin (February 2026). https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk/hmrc-tax-receipts-and-national-insurance-contributions-for-the-uk-new-monthly-bulletin ↩ ↩2 ↩3

  2. OBR: Inheritance Tax -- forecasts in depth (November 2025). https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/inheritance-tax/ ↩ ↩2 ↩3 ↩4 ↩5

  3. Charles Russell Speechlys: Autumn Budget 2025 -- Inheritance Tax (IHT) and charitable gifts (November 2025). https://www.charlesrussellspeechlys.com/en/insights/expert-insights/private-client/2025/autumn-budget-2025--inheritance-tax-iht-and-charitable-gifts/ ↩ ↩2 ↩3 ↩4 ↩5 ↩6

  4. GOV.UK: Inheritance Tax nil-rate band and residence nil-rate band thresholds from 6 April 2026. https://www.gov.uk/government/publications/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2026/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2026-to-5-april-2028 ↩

  5. HMRC Inheritance Tax Liabilities Statistics Commentary (July 2025). https://www.gov.uk/government/statistics/inheritance-tax-liabilities-statistics/inheritance-tax-liabilities-statistics-commentary ↩ ↩2

  6. Remember a Charity: Professional Adviser Tracking Study (June 2025). https://www.rememberacharity.org.uk/about-us/latest-news/6-in-10-professional-advisers-think-inheritance-tax-changes-will-prompt-growth-in-charitable-legacies/ ↩ ↩2

  7. Inheritance Tax Act 1984 Section 23 (Gifts to charities). https://www.legislation.gov.uk/ukpga/1984/51/section/23 ↩ ↩2 ↩3 ↩4 ↩5

  8. HMRC Inheritance Tax Manual IHTM11101: Gifts to charities or registered clubs -- introduction. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm11101 ↩ ↩2

  9. GOV.UK: HS342 Charitable giving (2025). https://www.gov.uk/government/publications/charitable-giving-hs342-self-assessment-helpsheet/hs342-charitable-giving-2025--2 ↩ ↩2

  10. Inheritance Tax Act 1984 Section 21 (Normal expenditure out of income). https://www.legislation.gov.uk/ukpga/1984/51/section/21 ↩

  11. GOV.UK: Inheritance tax -- anti-avoidance. https://www.gov.uk/government/publications/inheritance-tax-anti-avoidance-measures-for-non-long-term-uk-residents-and-trusts/inheritance-tax-anti-avoidance ↩ ↩2 ↩3 ↩4 ↩5

  12. HMRC Inheritance Tax Manual IHTM45001: Reduced rate for gifts to charity -- introduction and conditions. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45001 ↩ ↩2

  13. Finance Act 2012 Schedule 33 (Reduced rate of inheritance tax). https://www.legislation.gov.uk/ukpga/2012/14/schedule/33/crossheading/reduced-rate-of-inheritance-tax ↩ ↩2

  14. HMRC Inheritance Tax Manual IHTM45012: Calculating the baseline amount -- estate with two or more estate components. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45012 ↩ ↩2

  15. HMRC Inheritance Tax Manual IHTM45010: Calculating the baseline amount -- estate with a single estate component. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45010 ↩ ↩2 ↩3

  16. Stewardship: Reduced rate of inheritance tax -- avoiding the pitfalls. https://www.stewardship.org.uk/blogs/reduced-rate-inheritance-tax-avoiding-pitfalls ↩ ↩2

  17. HMRC Inheritance Tax Manual IHTM45030: The charitable giving condition or 10% test -- grossing up. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45030 ↩ ↩2

  18. GOV.UK: Inheritance Tax reduced rate calculator. https://www.gov.uk/inheritance-tax-reduced-rate-calculator ↩ ↩2 ↩3

  19. HMRC Inheritance Tax Manual IHTM45008: Charitable legacy worded to meet the 10% test. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45008 ↩ ↩2 ↩3

  20. HMRC Inheritance Tax Manual IHTM45035: Reduced rate for gifts to charity -- merger of components. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45035; IHTM45040: Elections -- election to opt out. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45040 ↩ ↩2 ↩3 ↩4

  21. Inheritance Tax Act 1984 Schedule 1A (Reduced rate of tax). https://www.legislation.gov.uk/ukpga/1984/51/schedule/1A ↩ ↩2

  22. Inheritance Tax Act 1984 Section 142 (Alteration of dispositions taking effect on death). https://www.legislation.gov.uk/ukpga/1984/51/section/142 ↩ ↩2 ↩3 ↩4

  23. HMRC Inheritance Tax Manual IHTM35028: Statement of intent must be included. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm35028 ↩ ↩2

  24. Charity Tax Group: Inheritance Tax. https://www.charitytaxgroup.org.uk/tax/inheritance-tax-2/ ↩ ↩2

  25. GOV.UK: Inheritance Tax -- household and personal goods donated to charity (IHT408). https://www.gov.uk/government/publications/inheritance-tax-household-and-personal-goods-donated-to-charity-iht408 ↩ ↩2

  26. GOV.UK: Restriction of charitable reliefs to UK charities and community amateur sports clubs. https://www.gov.uk/government/publications/restriction-of-charitable-reliefs-to-uk-charities-and-community-amateur-sports-clubs/restriction-of-charitable-reliefs-to-uk-charities ↩ ↩2 ↩3 ↩4 ↩5

  27. GOV.UK: Agricultural property relief and business property relief changes (December 2025). https://www.gov.uk/government/publications/changes-to-agricultural-property-relief-and-business-property-relief/agricultural-property-relief-and-business-property-relief-changes ↩ ↩2

  28. Finance Act 2025 c.8 Part 2 Chapter 4: Inheritance Tax -- Long-term UK resident. https://www.legislation.gov.uk/ukpga/2025/8/part/2/chapter/4 ↩

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