When I sit down with clients at Online Wills and Probate to talk about their Wills, one of the most rewarding conversations I have is about leaving something to charity. You’d be surprised how many people don’t realise they can make a gift to a cause they care about in their Will. Not only does it let you support something meaningful, it can also reduce inheritance tax, which means more of your estate can go to your loved ones.
Having spent 15 years in will writing and as an FCA-regulated financial expert, I’ve seen time and again how thoughtful planning can benefit both families and the charities that matter to them. It’s always a privilege to help people make decisions that leave a real impact.
In this post, I’ll explain the benefits of leaving money to charity in your Will under UK law, and I’ll answer some of the common questions I hear from clients every day.
How Leaving a Gift to Charity Could Save You Thousands
Inheritance tax in the UK can take a substantial portion of your estate. Currently, IHT is set at 40% on any amount above the £325,000 threshold (known as the “nil-rate band”). However, gifts to registered charities are exempt from inheritance tax. This means that anything you leave to charity in your Will is deducted from the value of your estate before tax is calculated.
For example, let’s say you leave an estate worth £600,000. Normally, after the £325,000 threshold, £275,000 would be subject to the 40% tax, meaning your family would pay £110,000 in IHT. But if you leave £50,000 to charity, that amount is subtracted from the taxable portion, bringing it down to £225,000. Your tax bill would then be £90,000 instead of £110,000, saving your family £20,000 while benefiting a cause you care about.
The 10% Rule: An Even Bigger Tax Break
In addition to the basic inheritance tax exemption for charitable gifts, there’s another crucial point. And not that many people know about. Leaving 10% of your net estate (the part of your estate over the nil-rate band) to charity, the tax rate on the remainder of your estate drops from 40% to 36%.
The Gov.uk website has a handy calculator. Us it for working out the amount you’ll need to donate to reduce the tax rate from 40% to 36%.
This is where I’ve seen clients really make a difference. For example, a client of mine had an estate worth £1 million (property and assets combined). She was initially planning to leave £50,000 to her favourite charity. After we crunched the numbers, I explained that if she increased her donation to £67,500 (10% of her net estate) she would reduce the inheritance tax on the remainder from 40% to 36%. By doing this, my client was able to give more to charity. More importantly, she was able to reduce her tax bill by an additional £13,500, leaving more to her family.
How Do You Leave Money to Charity in Your Will?
1. Pecuniary vs Residuary gifts
Leaving money to charity in your Will is straightforward. However, it must be done correctly to ensure that your wishes are carried out and estate receives the tax benefits. When drafting or updating your Will, you can include specific instructions to leave a cash sum (called a ‘pecuniary legacy’), a percentage of your estate (a ‘residuary gifts’), or even a specific asset, like a property or shares.
Residuary gifts are the recommended method for leaving charitable donations in wills. While cash sums depreciate over time, leaving a set percentage of your estate will raise in value. This is the best way to ensure that your inheritance tax is kept a minimum. And, more importantly, that your chosen charity benefits.
2. Name Your Charity
It’s crucial to properly identify a charity in your will. I always recommend including the full registered name and charity number to avoid any confusion. Charities like LCH Charity, St Giles Hospice, the British Heart Foundation or Cancer Research UK are common, but you can choose any charity that’s registered with the Charity Commission.
If you’re unsure how to word this in your Will, consult a professional will writer. At Online Probate, Jane – our resident solicitor will look through all the details of our wills. She works hard to ensure these details are correct. This way, your legacy is protected, and the tax savings are realised.
Can Family Members Contest Donations in My Will?
One concern that often comes up is whether family members can contest charitable donations. In the UK, under the Inheritance (Provision for Family and Dependants) Act 1975, certain individuals, such as spouses, children, or those financially dependent on you, can challenge your Will if they feel they haven’t been reasonably provided for. This could include contesting charitable gifts if they believe the donation leaves them with insufficient inheritance.
To reduce the risk of a challenge, I always recommend that clients discuss their wishes with their family in advance. Having open conversations can prevent disputes and ensure everyone understands why you’ve made certain decisions. In my experience, clients who involve their family in the planning process tend to have smoother outcomes, with less likelihood of contestation.
Is Tax Payable on My Donation?
The good news is that no tax is due on gifts left to registered UK charities in your Will. These donations are completely exempt from inheritance tax. That’s one of the reasons leaving a gift to charity can be such a smart part of your estate planning. By giving to a cause you care about, you can make a real difference while also helping to reduce the tax your estate would otherwise have to pay, which means more can go to your loved ones.
Can I Specify How a Charity Should Use My Money?
Yes, you can specify how you would like the charity to use your gift, but it’s essential to be cautious. I’ve had clients who felt very passionate about a specific project or cause within a charity, and they wanted to ensure their donation was used in a particular way. While this can be done, it’s important to discuss your plans with the charity first.
Many charities are happy to accommodate specific wishes, but it’s crucial to make sure your instructions are reasonable and achievable. If a charity is unable to fulfil your request, your gift might be refused or used in a different way, which is something I always advise clients to avoid.
Are There Any Rules About Leaving Money to Charity in Your Will?
Although there are no restrictions on which charities you can leave money to in your will, you do have to make reasonable provisions for any people that are financially dependent on you. This can include:
- A spouse or civil partner
- Children (or grown up offspring)
- A romantic partner that has been living with the deceased for at least two years
- Someone who has been fully or partially supported financially
Not making reasonable provisions means these individuals would be within their right to dispute your will after your death. Family members feel they’ve not been adequately provided for, they can contest a will under the Inheritance (Provision for Family and Dependants) Act 1975. The charity you’ve left money to would then have to go through costly legal proceedings to claim what is rightfully theirs.
The key to leaving money to charity
The key rule is that the charity must be registered in the UK to qualify for the tax exemption. Additionally, as I mentioned earlier, it’s essential to correctly identify the charity in your Will to avoid confusion. Other than that, there are no significant restrictions. You’re free to leave as much or as little as you like to charity.
It’s also worth noting that charitable giving is not just for the wealthy. In my experience, clients with estates of all sizes have been able to benefit from tax savings. And make meaningful contributions to charity. Whether you’re leaving £1,000 or £100,000, the process is the same, and the benefits are available to everyone.
Can I leave my house to charity?
Yes, you absolutely can. You can leave your house, or any other property, to a charity in your Will. When you do this, it’s called a specific gift (you’re giving an asset rather than money). It’s a really meaningful way to support a cause close to your heart. And it can also help reduce the inheritance tax on your estate, because the value of the property is taken out before tax is calculated.
It’s usually pretty straightforward, but there are a couple of things to keep in mind. First, the charity has to be happy to accept the property. Larger charities often have the means to manage or sell property gifts. However, it’s always a good idea to check with them first. That way, you can be confident your gift will be handled exactly how you want and will make the biggest difference possible.
One client of mine, for example, had a country home that she no longer needed. She wanted it to benefit a local hospice that had cared for her husband. By leaving the house to the hospice in her Will, she was able to make a significant contribution that went far beyond what she could have given in cash. The hospice later sold the property, using the proceeds to fund their ongoing services. The other added benefit was that her estate benefited from the IHT exemption on the value of the house. Leaving your house to charity can be a meaningful and tax-efficient way to make a lasting difference. Whether you intend to donate a holiday home, rental property, or even your primary residence, the gift can provide much-needed support to a cause while reducing the tax liability for your estate.
Will you leave money to charity in your will?
Leaving gifts or money to charity through your Will is a powerful way to support causes close to your heart. Additionally, it’s a really vital way of reducing your inheritance tax bill. By understanding the tax rules and making informed decisions, you can leave a lasting legacy. A legacy that benefits both your family and the charities you care about. If you’re considering leaving money to charity in your Will, it’s essential to seek advice from professional will writers like us. We’ll ensure everything is set up correctly. As someone who’s been through this process many times with clients, I can confidently say it’s one of the most fulfilling decisions you can make.
