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The potential inheritance tax advantages for those who do so have increased for many deceased estates with the recent changes to IHT reliefs.
Leaving charitable gifts under a will (or making inter vivos gifts) is an important tool for practitioners seeking to provide clients with balanced wealth and tax planning advice. Now that most of the changes to the IHT framework are in force, the balance has shifted and the benefits of charitable giving for clients impacted by the changes need to be reassessed.
Particularly, the limits placed on business and agriculture property relief kicked in for deaths from 6 April 2026. A further change, bringing occupational pensions into scope of IHT, comes in to effect next April. For deaths on and after 6 April 2027, unused occupational pension funds and death benefits will no longer be excluded from the valuation of a deceased estate for IHT purposes.
More estates will therefore become chargeable to IHT; and practitioners can expect an uptick in the number of clients seeking tax planning advice.
Benefits
According to the latest Legacy Giving Report (2026), around £4.4 billion in charitable legacies was given to UK charities last year. The financial advantages for charities - who are typically heavily reliant on legacy giving - cannot be understated.
And there are increasing benefits to wealthier individuals, given that leaving legacies to qualifying charities reduces the value of the estate for IHT purposes. Whether it is a simple pecuniary legacy, a residuary legacy; or a charitable trust or foundation created under the will - the IHT savings can be significant.
The charitable gift will be completely exempt from IHT. Further, if a testator leaves at least 10% of their net estate to charity, any IHT payable by the estate will be charged at the lesser rate of 36%. The potential tax savings may be substantial, providing valuable legacy income for the named charities and maximising the amount available for the client’s loved ones.
Practitioners should also explain to clients the option of making lifetime charitable gifts, which will also be completely free of IHT. It will be important to give wider consideration as to whether making lifetime gifts or testamentary charitable legacies/trusts may represent a greater tax incentive.
It is important for lawyers to keep contemporaneous notes and records of discussions with clients. Clients should be urged to discuss their plans with family members and explain their thinking to avoid potential confusion or disputes. They should also keep their wills and financial position under regular review, to ensure their will does not become ineffective – particularly if further IHT rule changes arise.
Guidance
The charity consortium, Remember A Charity, has just published a useful guide - Integrating Charitable Legacies into Wealth Planning - specifically for solicitors and other private client professionals advising high net worth clients. It covers, for example, the key principles for discussing philanthropy with clients, information on the specific legacy giving structures and practical conversation starters.
The principles outlined will be useful for discussions with their wealthier clients, alongside the wider tax considerations.
The upcoming LAW2026 Online Wills and Probate event will be diving deeper into the IHT topic and more this autumn. Explore the full course details here.
