The Autumn Budget 2025 introduced focused reforms to the inheritance tax (IHT) rules governing charitable gifts. These IHT changes to charitable gifts retain the full exemption for outright legacies to UK‑registered charities. However, gifts expressed simply as being “for charitable purposes” (to be applied by trustees later) will no longer qualify unless the recipient is itself a UK‑registered charity.
These changes apply to deaths on or after 6 April 2026, and to lifetime transfers made on or after 26 November 2025.
This article explains what has changed, why it may affect existing Wills, and the practical steps available.
What has changed under the IHT changes to charitable gifts?
The charity exemption in s.23 Inheritance Tax Act 1984 continues to apply in full to gifts made directly to a UK‑registered charity.
Under the IHT changes to charitable gifts, a legacy described as “to be held on trust for charitable purposes” will no longer attract the exemption unless the recipient trust is itself a UK‑registered charity.
In practice, this affects Wills leaving funds to be applied for charitable purposes at trustees’ discretion, often supported by a non‑binding letter of wishes. Previously, these gifts were exempt; going forward, they will not be unless the funds ultimately pass to a UK‑registered charity.
Why it matters for existing Wills
Many testators prefer broad “charitable purposes” wording, allowing trustees flexibility to choose charities over time without needing to update the Will. The reforms introduce two main risks:
- Loss of the IHT charity exemption where the legacy is to an unregistered charitable trust (even if it is unquestionably charitable as a matter of English law).
- A “charitable purposes” gift that no longer qualifies will not count towards the 10% charitable giving test. This could prevent the estate from benefiting from the reduced IHT rate.
How trustees can still secure the exemption
If an older Will leaves a gift “for charitable purposes”, trustees may still achieve an exempt outcome by distributing the funds to one or more UK‑registered charities within two years of death.
Where s.144 IHTA 1984 applies, the distribution is “read back” into the Will, treating the legacy as if it had been made directly to those charities. This restores the IHT exemption while retaining flexibility, provided trustees act within the two‑year window.
Letters of wishes should therefore be reviewed in light of the IHT changes to charitable gifts to ensure they clearly direct prompt distributions within that timeframe.
Planning for new Wills or updates to existing Wills
For new instructions or when revisiting older Wills testators could consider replacing broad wording with direct gifts. Naming specific UK‑registered charities ensures certainty and preserves the exemption but lacks flexibility. Alternatively options such as the Charitable Aid Foundation’s Charitable Legacy Service can also offer flexibility without potentially sacrificing the charitable exemption.
Conclusion
The IHT changes to charitable gifts narrow the exemption to gifts made directly to UK‑registered charities. Flexible “charitable purposes” clauses can still produce an exempt outcome, but only if trustees distribute to UK‑registered charities within two years under s.144. Looking ahead, clients will need to balance flexibility with certainty. They can either keep the current structure, noting the risks, change to an outright gift to a registered charity or consider an option such as the Charitable Aid Foundation.
If you have subscribed to our Quiz Membership 2026, please find this article’s quiz here. You must be signed into the partner area of our website to access this.
