Gifts to charity in wills fund a remarkable share of British charity: legacies are worth around £4 billion a year, and for some causes they are the largest single source of income. The law leans into this generosity with two tax advantages that make a charitable legacy one of the most efficient gifts an estate can make. Getting the wording right is the part people underestimate.
The two tax breaks, plainly
First: gifts to registered charities are completely free of inheritance tax. Whatever you leave to charity is deducted from your estate before the tax is worked out, so a £10,000 legacy costs a taxable estate £6,000 of what the family would otherwise have received, not £10,000.
Second, the one fewer people know: if you leave at least 10 per cent of your net estate (broadly, the part above the tax-free thresholds) to charity, the inheritance tax rate on the entire remainder drops from 40 to 36 per cent. Around that threshold the arithmetic turns strange and generous: increasing the charitable gift can leave your other beneficiaries better off, because the rate cut on everything else outweighs the extra given away. Wills are often drafted with a formula clause that pins the gift at exactly the qualifying 10 per cent, so the benefit holds even as the estate’s value moves.
Three ways to structure the gift
- A pecuniary gift: a fixed sum. Simple, but inflation quietly shrinks it between signing and death
- A specific gift: a named asset, shares, a property, a painting
- A residuary gift: a percentage of what remains after everything else. This is what charities themselves hope for, because it scales with the estate and never goes stale
Wording that survives contact with reality
Charities merge, rename and occasionally close, and a gift to a charity that no longer exists can fail entirely. Three habits prevent that:
- Name the charity exactly and include its registered charity number; there are several charities with confusingly similar names for every popular cause
- Add a merger clause: if the charity has merged or changed, the gift passes to its successor, or to a charity with similar purposes chosen by your executors
- Include a receipt clause, so your executors are discharged once an authorised officer of the charity signs for the gift
Two practical notes
Tell your family. A significant charitable gift that surfaces as a surprise at probate reads very differently from one you mentioned at Sunday lunch, and surprise is the soil disputes grow in. A short explanation in a letter of wishes helps too, particularly if the gift is large relative to what family members receive: courts weighing a claim under the Inheritance (Provision for Family and Dependants) Act 1975 take your recorded reasoning seriously.
And if you came to this through a free charity will scheme: they are a perfectly good route, just clear-eyed ones. The charity pays for the will hoping for a legacy; you remain entirely free to leave one or not.
Doing it with Willful
Charitable gifts are a standard part of the Willful interview, including the charity’s registered number, and our charitable legacy will is one of the ten will types the questions support. Every will is reviewed by an SRA-regulated solicitor, who checks exactly the failure points above, and where the 10 per cent rate reduction is in play the review flags it rather than leaving the saving to chance.