Brits are increasingly turning to a little-known inheritance tax (IHT) rule that could slash their tax rate from 40% to 36%—simply by leaving 10% of their estate to charity.
With IHT policy changes looming, financial advisers report a surge in demand for estate planning strategies that minimise tax bills while supporting meaningful causes.
How the 10% Charity Rule Reduces Inheritance Tax
Under current rules:
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Standard IHT rate: 40% on estates over the £325,000 nil-rate band (£500,000 if including the residence nil-rate band).
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Reduced IHT rate (36%) applies if 10% or more of the net estate is left to charity.
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Charitable gifts are tax-free, meaning more wealth stays in the family while supporting good causes.
Real-Life Example: £60,000 Tax Saving
Jude Dawute, MD of Benjamin House Financial Planning, shared a case study:
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Estate value: £2.5 million
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Projected IHT bill: £460,000
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10% charitable gift (£225,000): Reduced IHT rate to 36%
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New IHT bill: £400,000 (£60,000 saved)
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Result: Family kept £60,000 extra, while charities received £225,000.
Why More Brits Are Reviewing Their Wills
Upcoming IHT changes—including the freezing of tax thresholds and new pension inclusion rules (from April 2027)—are driving a wave of estate planning updates.
James Graham, Succession Wealth planner, says:
“Clients who weren’t previously affected by IHT are now reassessing their plans. Charitable giving is becoming a key tax-saving strategy.”
A Remember a Charity survey found:
✔ 92% of estate planners expect increased demand for IHT advice.
✔ 65% say charitable legacies will grow in importance.
How to Set Up a Tax-Efficient Charitable Legacy
1. Gift Through Your Will
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Simplest method: Leave a fixed sum or percentage to a registered charity.
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Minimum 10% donation triggers the 36% IHT rate.
2. Consider a Charitable Trust (For Larger Estates)
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Offers more control over how funds are distributed.
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Requires professional setup but provides greater flexibility.
3. Use Free Will Services
Some charities (e.g., Macmillan Cancer Support) offer free will-writing if you include a legacy gift.
Choosing the Right Charity: 3 Key Factors
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Personal Connection (e.g., health, community, or passion-related causes).
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Financial Transparency (Check the Charity Commission register).
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Long-Term Stability (Consider naming multiple charities to avoid failed gifts).
Expert Tip:
“Smaller charities often have lower overheads, meaning your gift has a bigger immediate impact.”
— James Graham, Succession Wealth
Next Steps: Get Professional Advice
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Consult a financial planner to calculate your IHT liability.
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Work with a solicitor to structure your will correctly.
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Review annually to adapt to changing tax laws.
