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:
Standard IHT rate: 40% on estates over the £325,000 nil-rate band (£500,000 if including the residence nil-rate band).
Reduced IHT rate (36%) applies if 10% or more of the net estate is left to charity.
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:
Estate value: £2.5 million
Projected IHT bill: £460,000
10% charitable gift (£225,000): Reduced IHT rate to 36%
New IHT bill: £400,000 (£60,000 saved)
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
Simplest method: Leave a fixed sum or percentage to a registered charity.
Minimum 10% donation triggers the 36% IHT rate.
2. Consider a Charitable Trust (For Larger Estates)
Offers more control over how funds are distributed.
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
Personal Connection (e.g., health, community, or passion-related causes).
Financial Transparency (Check the Charity Commission register).
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
Consult a financial planner to calculate your IHT liability.
Work with a solicitor to structure your will correctly.
Review annually to adapt to changing tax laws.
